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Price cutting and strong arming

Looking for help interpreting and answering two questions that relate to the article attached.

1.Minimum pricing allows a firm to stop retailers from lowering prices on competition with each other. Do you agree that there are "benefits to consumers" that would outweigh the benefit of lower prices; i.e., should firms be allowed to stop price cutting of their product.

2.Should a retailer have the right to "strong-arm" a manufacturer into not selling to a competing retailer?


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There are some instances in which price wars do harm to consumers. This happens when one retailer drives others out of business, and then raises its prices. It is also possible that prices fall so far that quality or service are sacrificed in an attempt to compete based solely on price. The issue is how such minimum price agreements are reached. Firms have the right to charge any price they like (assuming that the industry is not regulated in terms of price). So in general we find a variety of products with a range of prices. Often the premium products offer features that the discount products do not. Clearly consumers benefit when they can ...

Solution Summary

Benefits to consumers that result from higher prices; strong arming to keep competitors from lowering their prices