Question

1a. Explain why pricing below marginal cost might be viewed as a deliberate attempt to drive out a competitor rather than vigorous competitive pricing. Can you think of any situations where a firm might set a price below marginal cost but not be predatory pricing?

b. Think of reasons why bundling might be good for consumers and business. Under what circumstances could bundling create competition concerns? In particular, why might government be concerned if the firm that bundles the products has a monopoly in part of the bundle?

Answer 1

Answer:-

(a) :-

• Evaluating beneath minimal expense is seen as a conscious endeavor to drive out a contender in light of the fact that a maker don't get any benefit by valuing it's item underneath its minor expense.
• As the maker don't get any benefit and is offering his item for misfortune.
• Thus this activity is viewed as a conscious endeavor to dispose of the considerable number of contenders in light of the fact that such low costs will draw in a great deal of clients and it will turn out to be a misfortune condition for his rivals.
• We can consider the circumstance when a maker is neglecting to offer any of this item that is the reason he will set the costs for his items low underneath its negligible expense with the end goal to dispose of his items and get some estimation of the aggregate expense.

(b) :-

• Packaging is useful for purchasers and business since shoppers get things of different utilities as a set at lower cost.
• It is useful for business since it draws in a great deal if clients and they can dispose of some unsold items too.
• It makes rivalry worries as when one offers a ton of packaging, he drives every one of the clients towards itself
• Government must be concerned if the firm that packages an item has a syndication in part of the package in light of the fact that no other firm would have the capacity to give such a package and offer rivalry to that maker, making a circumstance of imposing business model in the packaging also.