Classroom Companion: Business

12
tisers and marketers by offering such algorithms. This is the reason why Facebook 
is so big in the advertisement business.
12.3.10 
 Product Tying
Product tying implies that the customer must purchase another product (called the 
tied product) in addition to the product the customer wants to buy. In some cases, 
this may lead to lock-in. For example, Apple initially sold iPhones in the USA 
together with a 2-year contract with the carrier Cingular (now AT&T) locking the 
customers involuntarily to this carrier (Honan, 
2007
). Microsoft Windows and 
Internet Explorer are also tied, making the market for independent browsers diffi-
cult because the strong lock-in of Microsoft Windows induces strong lock-in also 
of Internet Explorer. Product tying is generally forbidden in the USA, Europe, and 
elsewhere but is sometimes difficult to stop (Microsoft).
Google’s suite of apps is also a tied good but, since it is free for manufacturers 
of mobile phones to install the apps and for users to download them, is not 
regarded by the US Supreme Court to be illegal. On the contrary, the Court found 
that the practice of Google was beneficial for innovation and sales of mobile 
devices in general (Sidak, 
2015
).
12.4 
 Lock-In Cycle
Shapiro and Varian illustrate the dynamics of lock-in using the simple diagram 
shown in 
.
Fig. 
12.1
 (Shapiro & Varian, 
1999
). The lock-in cycle is as follows:
Entrenchment
Sampling
Brand selection
Lock-in
. Fig. 12.1 The lock-in cycle. (Authors’ own figure)
12.4 · Lock-In Cycle

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5
The cycle starts when the user chooses a new product (brand selection phase). 
This can be anything from becoming a user of a social networking service, sub-
scribing to music streaming services, building a new 5G mobile network, or 
purchasing a new smartphone. For the supplier, it is important to be more vis-
ible in the market and have a better reputation than the competitors. This then 
increases the likelihood that this supplier is among the brands the customer 
may investigate further.
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In the sampling phase, the customer may start using the new brand if it is avail-
able without binding conditions or, in case of large purchases, start negotiating 
price, amount, delivery conditions, and other contractual conditions with one 
or more suppliers. The supplier may offer inducements that stimulate the user 
to try the product, for example, offer the service for free for some time or offer 
free samples of the product. This may also include compensating costs associ-
ated with switching from another supplier. On the other hand, the customer 
should consider both the likelihood and consequence of being locked into a