Reference no: EM133082664

The smartphone industry is highly concentrated, and patent litigation is common. Apple has filed seven patent cases since 2006 and has been a defendant in more than 100. Firms in that industry have been referred to as "patent trolls," raising concerns about the social cost of patent cases.

1. Smartphones all rely on technology covered by a number of different patents, owned by many different firms. How does this complicate the competitive picture?

Price-fixing is a criminal offense. All firms that do business in the United States are subject to U.S. antitrust laws, regardless of where their owners live. In September 2012, executive officers of a Taiwanese firm, AU Optronics, were accused of price-fixing in the LCD screen business. The company paid $500 million in fines, and its chief executive was sentenced to three years in jail.

2. Suppose you believed that the size of the fine levied in price-fixing cases was an important deterrent to price-fixing. What market factors would you want to look at to figure out what fine to charge?

Until 2008 there were two airlines serving the Hawai'ian inter-island market: Hawai'ian Airlines and Aloha Airlines provided reasonably-priced service among the five major islands. But on March 20, 2008 Aloha declared chapter 11 (reorganization) bankruptcy. One month later the bankruptcy was converted to chapter 7 liquidation.

There were two main factors that led to Aloha's bankruptcy. The first was soaring fuel prices. The second was the entry of a new competitor, go! airlines, a subsidiary of the Mesa Air Group. go! had entered the market in June, 2006. They engaged in what can only be described as predatory pricing. For example, on June 9, 2007 the airline announced fares of $1 on many interisland routes.

3. Did go! engage in predatory pricing? Why was Mesa Air Group able to charge such low prices and stay in business while Aloha went bankrupt?

Almost 90% of advertisements in movie theaters are produced by two firms: National CineMedia, Inc., and Screenvision.

In 2014, National made an offer to buy Screenvision. The U.S. Department of Justice brought suit to block the merger, charging that it would reduce price competition.

National argued that the merged firms could benefit movie theaters with broader product variety.

4. Why do you think there are so few firms in this business in the first place?