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Tying sales happen when a customer is required to buy one product only if the customer also buys a second product. Tying sales are controversial because they force consumers to purchase a product that they may not actually want or need. Further, the additional, required products are not necessarily advantageous to the customer. Suppose that to purchase a popular DVD, the store required that you also purchase a portable TV of a certain model. These products are only loosely related, thus there is no reason to make the purchase of one contingent on the other. Even if a customer was interested in a portable TV, the tying to a particular model prevents the customer from having the option of selecting one from the numerous types available in the market. A related, but not identical, concept is called bundling    , where two or more products are sold as one. Bundling typically offers an advantage for the consumer by allowing them to acquire multiple products or services for a better price. For example, several cable companies allow customers to buy products like cable, internet, and a phone line through a special price available through bundling. Customers are also welcome to purchase these products separately, but the price of bundling is usually more appealing.

In some cases, tying sales and bundling can be viewed as anticompetitive. However, in other cases they may be legal and even common. It is common for people to purchase season tickets to a sports team or a set of concerts so that they can be guaranteed tickets to the few contests or shows that are most popular and likely to sell out. Computer software manufacturers may often bundle together a number of different programs, even when the buyer wants only a few of the programs. Think about the software that is included in a new computer purchase, for example.

Recall from the chapter on Monopoly that predatory pricing    occurs when the existing firm (or firms) reacts to a new firm by dropping prices very low, until the new firm is driven out of the market, at which point the existing firm raises prices again. This pattern of pricing is aimed at deterring the entry of new firms into the market. But in practice, it can be hard to figure out when pricing should be considered predatory. Say that American Airlines is flying between two cities, and a new airline starts flying between the same two cities, at a lower price. If American Airlines cuts its price to match the new entrant, is this predatory pricing? Or is it just market competition at work? A commonly proposed rule is that if a firm is selling for less than its average variable cost—that is, at a price where it should be shutting down—then there is evidence for predatory pricing. But calculating in the real world what costs are variable and what costs are fixed is often not obvious, either.

The Microsoft antitrust case embodies many of these gray areas in restrictive practices, as the next Clear it Up shows.

Did microsoft ® Engage in anticompetitive and restrictive practices?

The most famous restrictive practices case of recent years was a series of lawsuits by the U.S. government against Microsoft—lawsuits that were encouraged by some of Microsoft’s competitors. All sides admitted that Microsoft’s Windows program had a near-monopoly position in the market for the software used in general computer operating systems. All sides agreed that the software had many satisfied customers. All sides agreed that the capabilities of computer software that was compatible with Windows—both software produced by Microsoft and that produced by other companies—had expanded dramatically in the 1990s. Having a monopoly    or a near-monopoly is not necessarily illegal in and of itself, but in cases where one company controls a great deal of the market, antitrust regulators look at any allegations of restrictive practices with special care.

The antitrust regulators argued that Microsoft had gone beyond profiting from its software innovations and its dominant position in the software market for operating systems, and had tried to use its market power in operating systems software to take over other parts of the software industry. For example, the government argued that Microsoft had engaged in an anticompetitive form of exclusive dealing by threatening computer makers that, if they did not leave another firm’s software off their machines (specifically, Netscape’s Internet browser), then Microsoft would not sell them its operating system software. Microsoft was accused by the government antitrust regulators of tying together its Windows operating system software, where it had a monopoly, with its Internet Explorer browser software, where it did not have a monopoly, and thus using this bundling as an anticompetitive tool. Microsoft was also accused of a form of predatory pricing; namely, giving away certain additional software products for free as part of Windows, as a way of driving out the competition from other makers of software.

In April 2000, a federal court held that Microsoft’s behavior had crossed the line into unfair competition, and recommended that the company be broken into two competing firms. However, that penalty was overturned on appeal, and in November 2002 Microsoft reached a settlement with the government that it would end its restrictive practices.

The concept of restrictive practices is continually evolving, as firms seek new ways to earn profits and government regulators define what is permissible and what is not. A situation where the law is evolving and changing is always somewhat troublesome, since laws are most useful and fair when firms know what they are in advance. In addition, since the law is open to interpretation, competitors who are losing out in the market can accuse successful firms of anticompetitive restrictive practices, and try to win through government regulation what they have failed to accomplish in the market. Officials at the Federal Trade Commission and the Department of Justice are, of course, aware of these issues, but there is no easy way to resolve them.

Key concepts and summary

Firms are blocked by antitrust authorities from openly colluding to form a cartel that will reduce output and raise prices. Companies sometimes attempt to find other ways around these restrictions and, consequently, many antitrust cases involve restrictive practices that can reduce competition in certain circumstances, like tie-in sales, bundling, and predatory pricing.

Questions & Answers

when give the production of bread and pizza. where by bread produces 10 units and pizza 5 units. how do you calculate for the opportunity cost for bread and pizza
Jennifer Reply
6. The countries of Figistan and Blah are small island countries in the South Pacific. Both produce fruit and timber. Each island has a labor force of 1,200. The following table gives production per month for each worker in each country. a. Which country has an absolute advantage in the product
Bablu Reply
6. The countries of Figistan and Blah are small island countries in the South Pacific. Both produce fruit and timber. Each island has a labor force of 1,200. The following table gives production per month for each worker in each country. a. Which country has an absolute advantage in the producti
Bablu
Bablu XD
Neil
Buddy
Neil
We need to know the values to help
Neil
BASKETS OF FRUIT BOARD FEET OF TIMBER Figistan workers 10 5 Blah workers 30 10 Productivity of one worker for one month
Bablu
basket of fruit |basket of timber Figistan workers 10 5 Blah workers 30 10
Bablu
a. Which country has an absolute advantage in the production of fruit? Which country has an absolute advantage in the production of timber? b. Which country has a comparative advantage in the produc- tion of fruit? of timber? c. Sketch the ppf’s for both countries. d. Assuming no trading betwe
Bablu
Neil rawat
The
Hy neil
shaikh
please
The
please help
The
bablu
The
where the table
Souley
my own idea is that we should divide the number of baskets of fruits and timber by labour force
The
Is it true. can somebody correct me
The
No not true
Neil
Absolute Advantage is determined by the numbers
Neil
You can't just divide it or something
Neil
For example, US makes 8 Cars and 6 Fish Canada makes 2 cars 3 fish US has absolute advantage in this scenario
Neil
Rawat thank you
The
Neil Rawat but a country is said to have absolute advantage over another country when it spends less time producing a commodity
The
For example, 8 cars are produced in one hour. how can we calculate the amount of time for producing one car
The
Ruwat
The
Neil Rawat*
The
There are two types of Questions
Neil
Input and Output. The one that you just put and Bablu asked "Produced in one hour" or "in one month" is Input. Time is a resource. If it said this is just how much they produce, then it's output.
Neil
Shaikh, correct me if I'm wrong and Bablu I'll try to do the problem by 7:30 EST
Neil
Dude Bablu I think there's something wrong either with the question or the way you set that problem up
Neil
Cuz both countries can't specialize in both things
Neil
where is the following table?
ian
Figistan workers 10.........5 Blah Workers 30.............. 10
Neil
i don.t understand plz explain esaily
Saifullah Reply
hello . you mean about assignments help ?
Nhamo
which 1u don't understand
ubong
marginal cost for what
Xasan
definition of economics
Abdal
Marginal cost is the additional increase in quantity produced as a result of increasing total cost
The
MC=dTC/dQ i.e change in total cost as a result of change in quantity produced
The
hello
Soga
hello
Abdal
What happens to the quantity of dollars when the demand for it increases and supply decreases? Does the quantity or volume remain the same?
Anamaya
hello
Bablu
can i ask one question
Bablu
yes
Abdal
yes
Soga
price of dollars will increase
Harsh
what are the principles of economics
Gajendra Reply
Economics is a social science that studies how people satisfy unlimited wants with scarce resources. It involves the analysis of choice and trade through the use of intuitive graphs and mathematical elements. The discipline is divided into two sections: microeconomics (micro) and macroeconomics(macr
Zain
micro and macro principles
Souley
I want to know about microeconomics principles
Gajendra
micro study economics partly eg hw mankind's makes decisions
Souley
explain clearly
Gajendra
it focuses on the actions of Individual agent within an economy like households,business etc
Souley
I understand
Gajendra
good
Souley
hellow guys
Paul
hi
Souley
hi
Gajendra
Hi
Souley
how are you guys doing
The
Helloooooo
Steven
Hi
Souley
Economics is difficult
The
yes, you can say but the positive thinkers and doers can not say like it.
Gajendra
Yeah. I'm pessimistic
The
and I procrastinate too much
The
is true
Souley
yea hello
Kojo
what's the scope for an economist?
Aman
no idea
Steven
I'm having exams soon but I barely know the concepts, monopoly is difficult
Steven
I can help with assignments
Nhamo
Gajendra or anybody can you advice me on how I can improve on studying Economics
The
should I read a topic everyday. it will be difficult because I have other courses
The
what's unemployment
Souley Reply
increase in inflation
Zain
increase in jobless peaople
Zain
who are capable of doing job
Zain
hi
Vijay
hi
Zain
distinguish between substitution effect and income effect
albert Reply
Elucidate more on this please!
Moshood Reply
hello
Kojo
hi
Peter
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Abdal
Hi
Anamaya
Watsup
Darlington
Hello
Darlington
hi
Abdal
Who is an economist
Darlington
Hi
Ihtisham
hi
Peter
hi
Abdal
yes
Fazal
still studying
sean
The substitution effect is the change in consumption patterns due to a change in the relative prices of goods.
Moshood
Income effect is the change in consumption patterns due to the change in purchasing power.
Moshood
still freshman studying at Tubman University
Emmanuel
db awlad 97ab ghir ghatchr7ou liya chno wa93 hna wachmn level hada wla ghan7iw chi wld 9ahba fikom
Brahim
hi
Chidi
hi
bola
hey
cherie
hlw
God
Hi
Owusu
Hi
Patricia
hi
Rod
hi
shaikh
what is agriculture?
Emmanuel
Srsly
Neil
Hi everyone.
Royal
Economic is a subject which study buying and selling.
Royal
can u elaborate more?
Dazy
it is the study of the wealth of of a nation
Adesina
It can also be defined as the social science that studies how the available scarce resources can be distributed to satisfy unlimited human want
Adesina
elo house !
Adesina
I ave a question too
Adesina
hi
Prtj
guys I have questions which I am not able to solve could you guys help me
Prtj
ask
kartik
what is economic about
Gene
What the difference between economics and economics education?
Rasaq
economics is all about natural resources and how they are distributed to satisfied human wants
Souley
Almsot the same
Steven
what z international trade
ntaate Reply
The exchange of produce and services among different countries.
Anamaya
the exchange of good & services across international boundaries
WILSON
conditions of international trade?
Nusrat
Compare and contrast between Natural and Artificial Resources and their ultimate impacts in an economy. Give one example to support your discussion.
Angela Reply
Exemple: Diamant or uranium, fer, calcaire
Ramadan
how does interest rate affect aggregate output
kelvin Reply
what is Keynesian theory
kelvin
need a curves for typical isoquost and isoquant
kelvin
what is isoquant
kelvin
isoquat is a curve shows differnt combinations of two inputs which can produce same level of output
Majid
examples of giffen goods
Getrude
then what isoquost
Peter
, if the price of an essential food staple, such as rice, rises it may mean that consumers have less money to buy more expensive foods, so they will actually be forced to buy more rice.
Peter
that's an example
Peter
majid Khan that's the wrong definition of isoquant
The
you are defining isocost
The
isocost curve is a locus of points that shows the different combinations of commodities purchased by a consumer with a fixed budget
The
The change in fiscal policy leads to an increased level of output and interest rates is because an increase in government expenses directly affects aggregate demand. A decline in taxes result in more disposable income, consequently leading to a rise in consumption expenditure.
Peter
dats for kelvin
Peter
dats d answer for the audio how does interest rate affect aggregate output
Peter
question not audio
Peter
u are right joker
Peter
what is journal entry?
Abel
explain the nature of economics
Matilda Reply
interpret micro economic issues
Matilda
ito ang dami ng producto na nais handa at kanyang ibenta ng isang prodyuser
Jomar Reply
i dont understand
Gaabshe
even I also don't understand ..this language.. vn I converse everybody say farzana ur language is not understood by all user? now no one there is question about it?
shaikh
he is saying that "this is the amount of product it wants to be ready and sells by a producer"
Aman
I Merr has knowledge,which is the economiccircuit role in a society
Ramadan
What is diminishing returns?
Shadrach Reply
explain competitive demand
ADENIJI Reply
the demand that are compiting for sale. the buyer can substitute one for another good
Iftikhar
yg
Margarette
the demand where commodities fight for the market. in this type of demand, commodities can be substituted for the most suitable one subject to ( price, consumers choice, consumers income etc)
WILSON
Demand is said to be competitive when a commodity that is needed to satisfy wants in place of another similar goods. increase in price of a commodity X will result in increase in demand of the substitute (commmodity Y).
yusuf
examples of giffen goods are garri (cassava), maize
yusuf Reply

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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