[Economics-Case Study]

Abstract

The Supreme Court has made a mistake by deciding that the proposal, About the Japanese television manufacturer, the defendants in Matsushita, had acted as an independent competitors, had the greater plausibility than the plaintiff's charge that had conspired in order to depress the prices of United States of America and also capturing the huge part of American market. The prices were below than the domestic market and the4 independent competitors would not exported to United States of America. In addition, the evidence has shown the collision between home and American market. It was also shown that there would have been the large capacity to supply of Internet because of massive construction.

Economics

Introduction

The case was brought forward by NUE (National union electric cooperation) in the year 1970 (by 1974, sales of $ 140M) and again the case was brought forward by Zenith Radio Cooperation in the year 1974(sales of $ 910M, 23.8% of the television market in the year 1973) the leading seller in the television market of United states of America. The case was brought against by seven companies of Japan, including Toshiba, Sharp, Sony, Matsushita, Hitachi, Sanyo and Mitsubishi having the combined sale of almost over $ 20 B, 50% of the television market of United Sates of America

Discussion

The main problem of the case was that the seven companies of Japan were operating in many market of United States of America for instance tape players, radios, Televisions, and stereo equipments, but the focus of the case was the marketing of television in United States of America.The companies of Japan have jointly made a conspiracy in order to destroy the television market of United States of America by using following strategies. The changing monopolies prices and fixing the prices in the market of Japan and Subsidizing the cost predatory pricing in the United States of America by using the profit which is gained from monopoly pricing in Japan.

The Plaintiff was arrested, as the independent firms were charging rapacious pricing in one market and also collusively charging super competitive pricing in another. There were many laws that were broken by the defendants but the focus of the case was on the violation of the Sherman Act (conspiracy to monopolize and restrain the trade). There was an unusual data in the amount of economic data used and it employed the following theory.

The economic theory of predation

The law of one price

The principle of an alternative cost known as an opportunity cost

The theory of cartel cheater

The market shares for the defending parties were low and therefore the court also decided not to put barriers of entry for them, the assumed predation was collusive and also the court decided to accept the claim of an expert economist that the alleged predation would have been lead to the significant amount of losses that would not be recouped.

Economics of Predatory Pricing

Generally the predator is larger than its rival. Cost that would be incurred will exceed cost that is being imposed. It is very easy to manage the ...