Over the years, various products have been \"given away\" or \"integrated\" into

Question

Over the years, various products have been "given away" or "integrated" into other products as a way of using "predatory pricing" to keep competitors out of the market.

One famous example was Microsoft trying to embed their Internet Browser (at the time Internet Explorer) directly into Windows. That was an attempt to force their rivals (Netscape Navigator) out of the market. After all, if Microsoft gives away a product, how could other firms charge for the product? After the other firms exit the market, Microsoft's incentive to improve their product diminishes, and they could then potentially charge monopoly prices for the product. This would not be good for consumers.

Identify other examples of predatory behavior or historical monopolies. Let's show just how often, and in how many industries these issues arise.

Be sure to include a source/link! Here's an article that discussed the situation above.

http://www.investopedia.com/ask/answers/08/microsoft-antitrust.asp

NOTE: The media often uses the term "monopoly" to mean a firm has a lot of market power (say Microsoft). However, in academics, Monopoly strictly means that only ONE firm controls the entire market. Make sure you are using the definition of monopoly used in this course!

Explanation / Answer

The another example of predatory pricing or bundled pricing is the Microsoft Office application that was used by the Microsoft to drive the competitors out of the market in the past. The Microsoft Office package has a combination of different applications such as Word, Excel, Power-point, Publisher and many more. The publisher application was given to drive out PageMaker. The front-page express was given to drive out the Dreamweaver. Though, the company could not get the fully successful in its intentions. Here, the company could not establish the monopoly (as defined in the books), but established a strong market power in the business domain of office applications.

The bundled pricing offered by the restaurant chains such as McDonalds is the example where the company is offering bundled products at relatively lower cost and discouraging consumers to go for the independent choices. The intention is not to manipulate the marketplace, but to manipulate the choices and purchase behavior of the consumers. It does not create a monopoly, but it affects the buying behavior of the consumers.

References:

Full web URL cannot be provided due to the answering board guidelines.

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