User:StefanHoughton/sandbox

Bundling is another form of anti-competitive practice which occurs when a retailer offers a good at a discounted value when a specific good is purchased in association with such good. Monopolies and dominant firms can use their market power to disrupt competition and deter consumers away from a competitor by offering a discount. Large firms have the capacity to do so as they have higher economies of scale and can afford to offer the discount unlike smaller competitors. This was evident in the case of 3M versus LePage. Scotch brand tape manufacturer, 3M, sued competitor, LePage, of using their bundle rebate program across a range of products which were closely competitive. Not all forms of bundling are anti-competitive practice but monopolies who specifically use bundling as a method to gain an unfair share of the market are closely investigated by authorities for lessening competition. Generally speaking, bundling is only considered antitrust when it reduces the total supply of the particular product within the market.

[|Limit Pricing] is a strategy used by monopolists to achieve a level of supernormal profits. To achieve limit pricing, monopolists set their price equal to marginal cost (P=MC). In the short-run the monopolist earns less profit, however, it means that new entrants into the market and smaller firms are unable to compete with the monopolist at such a low price due to the monopolist having much lower average costs per unit. Therefore, by sacrificing supernormal profits in the short run, the monopolist is able to leverage their economies of scale and deter new entrants from the market and gain a significant market share in the long run.