Impacts of tying and bundling practices of multi-sided platforms, in light of network effects, on consumer surplus.

Motivated by Google Android antitrust case, this article investigates the effect of tying on Google’s cross-subsidization by means of a theoretical model. Namely, the setting of the model is such that consumers single-home while advertisers multi-home. We show that tying enables Google to adapt its pricing structure. Especially, within the setup of the model, it appears that consumers price decreases while advertisers price is unchanged. Besides those results hold when both sides benefit from interacting but also when advertisers are viewed as a nuisance. In the latter case, however, advertisers should value that interaction more than consumers dislike it. Moreover, even tough all aspects influencing consumers’ welfare cannot be evaluated, we provide indication that consumers’ welfare may be enhanced as a result of tying. The reason is that the reduction in prices offsets the loss of products variety. This result also outlines that Google’s exploitation of consumers’ default effect could make consumers better off.