Suppose an intermediary provides a benefit to buyers when they purchase from sellers using the intermediary's technology. We develop a model to show that the intermediary will want to restrict sellers from charging buyers more for transactions it intermediates. We show that this restriction can...

A new theory of loss-leader pricing is provided in which firms offer low advertised prices for certain goods to signal that their other unadvertised (substitute) goods are not priced too high. The theory applies to the pricing of upgrades, in which the basic version of the good is advertised,...