Why do companies sell cheap printers but charge a fortune for the ink?

Tying is a business strategy where companies sell a base product at a low price while requiring customers to purchase a variable good at a high markup. This video explores how this form of price discrimination functions and its impact on social welfare.

Tying occurs when a company links a base good, such as an HP printer, a cell phone, or a Kindle Fire, to a necessary variable good like ink, data plans, or digital media. By selling the base product near its marginal cost and the variable component at a significant markup, firms can effectively price discriminate.

This strategy is designed to increase total output and social welfare. The video examines the economic mechanics behind these practices, distinguishing between tying and bundling, and addresses the broader debate regarding whether these arrangements ultimately benefit or harm the consumer.

Source: Tying