Tying and freebies in two-sided markets

► Firms use tying to subsidize participation in two-sided. ► For a monopoly, this raises participation and benefits consumers on both sides. ► In a duopoly, tying on one side softens competition on the other side. ► It may not be ex-ante optimal while the competing platform may benefit from it. ► Tying increases total welfare if network effects are strong.