a. EAuction and EMarketplace are two competing Internet auction sites, where buyers and

Chapter 0, Problem 23

(choose chapter or problem)

a. EAuction and EMarketplace are two competing Internet auction sites, where buyers and sellers transact goods. Each auction site earns money by charging sellers for listing their goods. EAuction has decided to eliminate fees for the first transaction for sellers that are new to their site. Explain why this is likely to be a good strategy for EAuction in its competition with EMarketplace. b.EMarketplace complained to the Justice Department that EAuctions practice of eliminating fees for new sellers was anticompetitive and would lead to monopolization of the Internet auction industry. Is EMarketplace correct? How should the Justice Department respond?c. EAuction stopped its practice of eliminating fees for new sellers. But since it provided much better technical service than its rival, EMarketplace, buyers and sellers came to prefer EAuction. Eventually, EMarketplace closed down, leaving EAuction as a monopolist. Should the Justice Department intervene to break EAuction into two companies? Explain. d.EAuction is now a monopolist in the Internet auction industry. It also owns a site that handles payments over the Internet, called PayForIt. It is competing with another Internet payment site, called PayBuddy. EAuction has now stipulated that any transaction on its auction site must use PayForIt, rather than PayBuddy, for the payment. Should the Justice Department intervene? Explain.