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Chapter 27: Q.15 (page 622)

A firm that sells both Internet-security software and computer antivirus software will sell the antivirus software as a stand-alone product. It will only sell the Internet-security software to consumers in a combined package that also includes the antivirus software. What is this business practice called?

Short Answer

Expert verified

Bundling of products results in a different price.

Step by step solution

01

Introduction.

Intellectual property, business plans, financial information, products, services, manufacturing techniques and practices, costs, sources of supply, marketing plans, advertising plans, customer lists, marketing, profits, methods are useful, staff, and business relationships are all examples of business practises.

02

Given data.

Bundling is the practice of selling web security software and pc antivirus software together. Selling two or more things together is referred to as bundling.

03

Explanation.

Because consumers must pay more for the bundled products, an antitrust authority can interpret the practice of marketing combination products as price discrimination. Bundling of products results in a different price.

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Most popular questions from this chapter

Local cable television companies are sometimes granted monopoly rights to service a particular territory of a metropolitan area. The companies typically pay special taxes and licensing fees to local municipalities. Why might municipality give monopoly rights to a cable company?

Recently, a food retailer called Whole Foods sought to purchase Wild Oats, a competitor in the market for organic foods. When the Federal Trade Commission (FTC) sought to block this merger on antitrust grounds, FTC officials argued that such a merger would dramatically increase concentration in the market for "premium organic foods." Whole Foods' counterargument was that it considered itself to be part of the broadly defined supermarket industry that includes retailers such as Albert sons, Kroger, and Safeway. What key issue of antitrust regulation was involved in this dispute? Explain.

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Evidence compiled by government officials investigating such agreements has revealed that conspiring firms often utilize similar methods of establishing and enforcing collusive restraints of trade. Most agreements, for instance, assign to each firm an allowed market share, a permitted region of operations, or an approved set of customers. In addition, participating firms commonly are required to exchange sales information so that they can monitor adherence to their agreements to restrain trade. In this chapter, you will learn why firms that typically utilize these techniques to formulate and maintain collusive agreements engage in secret conspiracies: Such agreements are illegal under U.S. antitrust laws.

Explain the main rationales for regulation of industries that are not inherently monopolistic

Consider the data from Problem 27-11. Suppose that antitrust authorities have determined that the relevant market includes both e-books and physical books. These authorities perceive that a monopoly situation exists that can be challenged on legal grounds if the value of the Herfindahl-Hirschman Index exceeds 5000. On the basis of this criterion, do the antitrust authorities conclude that there are grounds for a legal challenge? Explain.

A package delivery company provides both overnight and second-day delivery services. It charges almost twice as much to deliver an overnight package to any world location as it does to deliver the same package to the same location in two days. Often, second-day packages arrive at company warehouses in destination cities by the next day, but drivers intentionally do not deliver these packages until the following day. What is this business practice called? Briefly summarize alternative perspectives concerning whether this activity should or should not be viewed as a form of price discrimination.
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