Which statement is inconsistent with a tie- in pricing scheme?
A)The monopolist charges prices that capture consumer surplus.
B)The monopolist charges a zero price on the monopoly good and a high price on the tied- good.
C)The monopolist charges a lower than equilibrium price on the monopoly good and higher than equilibrium price on the tied- good.
D)The monopolist charges prices that generate dead weight loss.

Question

Quizplus · Accepted Answer

A tie-in pricing scheme is when a monopolist sells two products together, where one product is a monopoly good and the other is a tied good that is complementary to the monopoly good. In a tie-in pricing scheme, the monopolist charges a high price on the monopoly good and a low or zero price on the tied good to increase demand for the monopoly good. Therefore, statement B is consistent with tie-in pricing, while the other statements are inconsistent.

Which Statement Is Inconsistent with a Tie- in Pricing Scheme