Firm 1 produces products A and B. It is a monopolist of A, but is only one of many perfectly competitive firms in the market for B. Assume that Firm 1 can extract all the consumer surplus in the A market, under independent pricing. Under this assumption, can Firm 1 increase profits by tying B to A?

Answer rating: 100% (QA)

Yes Firm 1 can potentially increase its profits by tying product B to product A given that it is a monopolist in the A market and operates in a perfec... View the full answer