00:01
Here everyone, today we're solving problem number 18 from chapter 11 of the textbook, which asks us to define what a tie -in or tying sale is, to talk about how it reduces competition, and then to state in what situation is acceptable.
00:19
So, from page 270 of our textbook, they give us this definition, tie -in sales are situations when a customer is required to buy one product, only if the customer also buys a second product.
00:34
So that is your definition right there.
00:37
Let's read on.
00:38
It says they are controversial because they force customers to purchase a product that they may not actually want or need.
00:47
Further, the additional required projects are not necessarily advantageous to the customer.
00:53
Suppose that you purchase a popular dvd, the store required that you also purchase a certain portable tv model.
01:02
These products are only loosely related, thus there is no reason make the purchase of one contingent on the other.
01:08
Even if a customer were interested in the affordable tv, the tying to a particular model prevents the customer from having the option to select one from the numerous types available in the market.
01:21
So why is the reduction in competition? so it reduces competition.
01:37
I'm going to abbreviate competition with comp, just so you all are aware.
01:44
So it reduces competition.
01:51
Because the buyer for the customer, ironworks, might just refuse altogether to buy the product.
02:28
I'm just going to say item because it's shorter, but products, the more popular terminology and micro.
02:36
They might just refuse to buy the item or product because they can't afford the other tying products.
02:43
In the scenario given, they may not be able to afford a portable tv model with, you know, like if you go to a blockbuster, which they're very few now in the world, i think there's only one remaining, and you buy a popular dvd, you shouldn't have to also purchase this certain portable tv model, you know, and they're requiring it, which means it's extra money for the consumer or the buyer or the customer, you know, they're not going to want to pay that because they, i'll just say he, because the customer, he or she, can't afford, and what can't they, afford, well, that portable tv model.
03:39
And that is just known as the other tie -in item or other tie -in product.
04:01
So that's basically why there's a reduction in competition.
04:07
Now the second part, which is less obvious from our explanation and the example given is when is it acceptable...