According to the Cahner’s In-Stat Group, the number of worldwide wireless phone

Question

According to the Cahner’s In-Stat Group, the number of worldwide wireless phone subscribers will soon reach the 1 billion mark. In the United States alone, the number of wireless subscribers is projected to grow by almost 17 million subscribers per year for the next five years. Contributing to the extensive growth are lower prices, larger geographic coverage, prepaid services, and Internet enabled phones. While the actual cost of a basic wireless phone is about $150, most wireless carriers offer their customers a “free” phone with a one-year wireless service agreement. This pricing strategy is consistent with which of the following: Instructions: You may select more than one answer.

Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit.

Two-part pricing

Cross subsidization

Bundling

Second-degree price discrimination

Explanation / Answer

Ans:

Cross subsidization

Bundling

Explanation: This pricing strategy is consistent with cross subsidization. Phones and services are complements in demand.In addition, there may be cost complementarities and economies of scope since it is cheaper for providers to train employees to activate in-house phones rather than other brands purchased elsewhere.

This strategy is also consistent with bundling.Here, the company may say that the phone is “free,” but in actuality it is part of a bundle that cannot be broken apart.

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