According to International Data Corporation (IDC), the number of worldwide smart phone owners will soon exceed 3 billion. That number is expected to grow at nearly 10 percent per year for the next five years. While the actual cost of a smartphone is about

$300, wireless carriers in some countries offer their customers a "free" smartphone with a two-year wireless service agreement.

(a) What would you call this pricing strategy?

(b) Is this pricing strategy rational (does this pricing strategy lead to higher profits)? Please

explain.