market.Ifthemonopolistcandecidewhethertobundlebeforethetwo rmscompeteinprices,Whinstonshowsthattyingmakesthemonopolistmoreaggressiveanddiscouragesentry.However,iftherivalstaysinthemarket,bundlingmayactuallyhurtthemonopolist.Credibilityofcommittingtobundlingearlyiscriticalinthismodel.

CarltonandWaldman(2002)consideranothersettinginwhichanentrantcanprovideacomplementaryproductthatissuperiortotheincumbent’ssecondproduct.Iftheentrantcommitstoenteringthecomplementaryproductmarketonly,itsentryincreasesindustrypro t,whichinturnmaybene ttheincumbent rm.However,iftheentrantmightlaterentertheoriginalproductmarket,theincumbent’spro twouldbea ected.Inthiscase,theincumbenthasincentivestoo erbundlingofthecomplementaryproductsinitiallywhichcouldnotbematchedbytheentrantbecauseofitssmallscale.Therefore,tyingcanbeusedtodenyasmall-scaleentrantanddeterentry.

ArecentpaperbyNalebu (2004)o ersanotherperspectiveontying.Inhismodel,theincumbentisatwo-productmonopolistfacingapotentialentrantthatmayenterineithermarket.Heshowsthatbundlingallowstheincumbenttouseitsmonopolypowerineachmarkettoprotectitsstatusintheothermarket.Sincebundlingisalsopro tableabsententry,itisacredibletoolforentrydeterrence.Nalebu furthershowsthatinhismodelthegainsfromthepricediscriminatione ectaregenerallysmallascomparedwiththegainsfromtheentry-deterrencee ect.

2.4.CountervailingBuyerPower.Marketpowerofdominantmanufacturersmaybeconstrainedbyindependent,dominantretailersorbuyers.Theroleofbuyerpowerhas rstbeenaddressedinanearlybookentitledAmericanCapitalism:TheCountervailingPowerbyGalbraith(1952).Hearguesthatlargeretailorganizationssuchasthemajorchainstoreoperatorsareabletoexercisecountervailingpowerovertheirsupplierstolowerwholesalepricesandarewillingtopassthesesavingstotheircustomers.Thisleadshimtoconcludethatretailers’countervailingpowerissociallydesirable.However,Galbraithdoesnotexplainwhyretailerswouldhaveincentivestopasscost-savingstoconsumers.

Inarecentpaper,Chen(2003)providesaformalmodeltoexaminethiscountervailing-powerhypothesis.Chenshowsthatanincreaseintheamountofcountervailingpowerpossessedbyadominantretailercanleadtoafallinretailpriceforconsumers.Healsoillustratesthatduetopossiblee ciencyloss,totalsurplusdoesnotalwaysin-creasewiththeriseofcountervailingbuyerpower.Chenfurtherarguesthatthepresenceoffringecompetitioncanbecrucialforcountervailingpowertobene tcon-sumers.Thisanalysishasimportantimplicationsincompetitionpolicyenforcement.