Question

What is a tie-in sale? How might it reduce competition and when might it be acceptable?

Short answer

Restrictive practice to curb competition.

Step-by-step solution

Step1. Introduction

The practice of tie-in sales is a method to curb competition and earn higher profit.

Step2. Definition

The practice of tie-in sales or tying sales is a method by which sale of a product occurs, tied with another product. In other words, the product is not loosely sold but with another product which may or may not be required by the consumer.

Step3. Implication

The practice of tie-in sales is a method of curbing competition. It reduces competition by limiting the choices available to the consumers. They bind a product, with say another product whose sales are not as high, thus taking away the freedom of consumers to choose products rationally.

Step4. Explanation

The practice of tying sales is wrong as it takes away the freedom of consumers to freely choose the products they want. It might be acceptable if the two products are highly related and complementary to each other. If the rational consumer identifies the good to be advantageous to them, then the practice maybe labelled as acceptable.