Question

In 2015 Qualcomm, Inc., an American multinational semiconductor company, came under scrutiny for its business practices by the United States and the European Union. It was argued that Qualcomm was paying a major customer to exclusively use its chips. In addition, Qualcomm was accused of selling its chips below cost in order to drive one of its competitors, Icera Inc., out of the market. Based on what you have learned in this chapter, which of the following behaviors is Qualcomm engaging in, and if proven to have occurred, could be at odds with U.S. antitrust law? Instructions: select all statements that are true

Qualcomm was engaged in limit pricing

Qualcomm was foreclosing the chip market.

Qualcomm was engaged in predatory pricing.

Qualcomm was utilizing a first-mover advantage.

Answer 1

Qualcomm was engaged in predatory pricing.

Qualcomm was utilizing a first-mover advantage.

reason:

Predatory pricing involves pricing the product so low that it attracts most of the customers and drives competitors out of market. This is exactly what Qualcomm did to Icera Inc.

Qualcomm also had first mover advantage as it was the first company to produce mobiles as we know it today. In other words, it is the first entrant and has competitive edge over the resources in the market. so it was possible for it use its first mover advantage against Icera Inc.

On the other hand,

Limit pricing is a strategy where a monopolist reduces the prices so low that it makes it unprofitable for others to enter the market. As Icera Inc. was already in the market, limit pricing is not appicable in this context.

Foreclosing chip market refers to production limitation on a seller. Qualcomm was playing with prices.