Context

Applying Froeb's analytic method.

Read the example in the activity while keeping in mind the following questions:

• Who made the bad decision?
• What information did they have? And was it good, bad, or unclear?
• What was their incentive?

Activity

Read the following and then respond to the activity.

• Intel made large loyalty payments to HP in exchange for HP buying most of their chips from Intel instead of rival AMD. AMD sued Intel under the antitrust laws, and Intel settled the case by paying $1.25 billion to AMD.

Address the following:

• What incentive conflict was being controlled by these loyalty payments?
• What advice did Intel ignore when they adopted this practice (consider how the Robinson-Patman Act applies to their practice) and speculate why Intelignoredthe advice.