Discussion 2 - Who made the bad decision

Question 2:

Context

This week's discussion will provide you with an opportunity to apply Froeb's analytic method.

Keep the following in mind:

· Who made the bad decision?

· What information did they have? Was it good, bad, or unclear?

· What was their incentive?

Instructions

Read the following and then respond to the discussion prompt:

· 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 in your discussion post:

· 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.) Speculate why Intel ignored the advice.