Computer software manufacturers may often bundle a number of different programs, even when the buyer

wants only a few. Think about the software that is included in a new computer purchase, for example.

Recall from the chapter on Monopoly that predatory pricing occurs when the existing firm (or firms) reacts to a

new firm by dropping prices very low, until the new firm is driven out of the market, at which point the existing

firm raises prices again. This pattern of pricing is aimed at deterring new firms from entering the market.

However, in practice, it can be hard to figure out when pricing is predatory. Say that American Airlines is flying

between two cities, and a new airline starts flying between the same two cities, at a lower price. If American

Airlines cuts its price to match the new entrant, is this predatory pricing or is it just market competition at

work? A commonly proposed rule is that if a firm is selling for less than its average variable cost—that is, at a
{"batch_upload": true, "creationdate": "2022-12-07T14:15:44-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_type": ".pdf", "moddate": "2022-12-07T14:23:05-06:00", "total_pages": 597, "title": "Principles of Microeconomics 3e", "file_name": "Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "creator": "PDFMiner", "upload_timestamp": "2026-02-07T15:37:44.339247", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_size_mb": 26.99, "uploaded_via": "batch_uploader", "source": "downloads\\business\\economics\\Microeconomics3e.pdf"}