This week’s discussion will provide you with an opportunity to apply Froeb’s analytic method.
Read the example in the discussion instructions 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?
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) and speculate why Intel ignored the advice.
Practice Froeb’s rule. Assume the actors behaved rationally. What went wrong? Take a look at the link on Plan Completion Bias.
Why did Intel make the mistake and fight? Is there any explanation that can support the decision to fight as rational?
Note: In your discussion posts for this course, do not rely on Wikipedia, Investopedia, or any similar website as a reference or supporting source.
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