Seller-Side Tying of Platform Services

Résumé

This paper analyzes seller-side tying on digital platforms, where access to a core intermediation service is conditioned on sellers using an ancillary service (e.g., fulfillment or payments). We model a monopoly platform matching consumers and competing sellers across many product categories, with consumers valuing the ancillary service heterogeneously. When adoption is voluntary, sellers under adopt because asymmetric adoption creates vertical differentiation that softens price competition, raising prices and reducing platform participation. Tying restores high adoption, intensifies competition, and increases consumer surplus. A ban on tying or structural separation lowers adoption and can harm consumers.