Question

What is the following scenario an example of? A telephone company makes consumers buy landline phones in order to buy cell phones. A. price discrimination B. price fixing C. predatory pricing D. tying contracts

Answer 1

The answer is D. A tying contract forces the buyer only on the condition that the buyer also purchases a different product from the same company. This ensures that the buyer gets what they want, but it could end up being twice the amount due to the unwanted item.

Answer 2

The scenario is an example of a tied contract or agreement. The phone company is tying the cell phones, and the customers are agreeing to purchase the tied landline in order to receive their cell phones.