Case Study Intel’s “rebates” and Other Ways It “Helped” Customers
In your judgment is Intel a “monopoly”? Did Intel use monopoly-like power, in other words, did Intel achieve its objectives by relying on power that it had due to its control of a large portion of the market? Explain your answers.
In my judgment Intel did react like a monopoly. Pure monopoly exists when a single firm is the sole producer of a product for which there are no close substitutes. The characteristics of a monopoly are a single seller, unique product no substitutions, the firm is the price maker and entry and exits are blocked. In this case study there were several evidence that Intel attempted to create a monopoly. First, Intel developed and patented a new microprocessor which legally barred AMD from making it. Second, when AMD created a better microprocessor, Intel offered rebates in the form of millions of dollars to the major computer companies in Japan. The company’s that received the rebates agreed to stop buying from AMD. Third, Intel coded its software to inhibit the ability of AMD’s microprocessors to run efficiently. Fourth, Intel punished computers like Dell when they refused to boycott AMD.
In your judgment, were Intel’s rebates ethical or unethical? Explain your answer.
Rebates for sales volume are common in the computer industry. When I purchased my computer there was a rebate incentive which lowered the price of the computer. Paying companies to not use your competitors' products is where Intel crossed the line to unethical. Intel utilized anticompetitive tactics and explicit agreement that restrained the competition. Intel was not the only unethical company in this case study Dell was unethical in receiving the rebates. For several years, Dell produced record breaking profitability without disclosing to investors that the profits were primarily from the rebates and incentives of Intel, Dell deceived investors by stating the high profits were due to...
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