Anti-competitiveness of Instant Messenger Tying by Microsoft

Abstract

In this paper, we theoretically analyze Microsoft's tying practice in the instant messenger market. Using a model that highlights distinct features of the instant messenger, which are different from the cases of the web browser and the media player, we show that Microsoft can leverage its monopoly power in the operating system (OS) market to the instant messenger market through tying strategy. Microsoft's messenger tying hurts consumers because it enables Microsoft to monopolize messenger market and so fully exploit consumer's willingness to pay to the OS-messenger bundle. However, since tying saves installing costs, consumer loss is not so serious that total surplus improves under messenger tying. Finally we show that such results are robust to the possibilities of multi-homing in the instant messenger market.