Module 9 Flashcards
Monopoly behaviors
1) Restrict Output
2 price discrimination
3) predatory pricing
4) tying contracts
Price discrimination
Charging different prices to different people
Predatory pricing
Price really low to get rid of or prevent a competitor
Tying contract
An agreement by a party to sell one product but only on the condition that the buyer also purchases a different (tied) product
1st degree price discrimination
Charging different prices to different individuals
-buying and negotiating a price with a car dealer (everybody can potentially get a different price)
2nd degree price discrimination
Price discrimination by quantity
- eating 10 sandwiches at a restaurant and you get a free one
- flying and getting points and getting a free flight
3rd degree price discrimination
Discrimination by market
- student discounts
- senior discounts
Sherman Act
Any contract, combination or conspiracy in restraint of trade
Any monopolization, attempted monopolization, or conspiracy or combination to monopolize
Rule of Reason
Adds word “unreasonable” to Sherman Act
Clayton Act
-Labor is NOT a commodity
Exempts labor unions from anti trust
laws
-treble damages
Can sue for damages and not just amount owed
-interlocking directorates
Can’t have same board of directors for multiple companies
-mergers
Government can control mergers and acquisitions
Network externalities
The effects a product or service has on a user while others are using the same or compatible product or services
Bid rigging
Illegal practice between two or more parties who collude to choose who will win a contract
Perfect competition
Many small firms producing identical products
Monopolistic competition
Many small firms producing differentiated products
