Chapter 4 Discussion Ethics in the Marketplace Paul

Chapter 4 Discussion: Ethics in the Marketplace Paul L. Schumann, Ph. D. © 2004 by Paul L. Schumann. All rights reserved. 4 -1

Perfect Competition ¨ What is meant by a perfectly competitive free market? § Why do we need numerous buyers and sellers (none with substantial market share) with everyone being able to enter or leave the market? 2

Perfect Competition ¨ What does a demand curve indicate? § What is the principle of diminishing marginal utility? ¨ What does a supply curve indicate? § What is the principle of increasing marginal cost? ¨ In a free market, how is the equilibrium price determined? § What happens if the price is above equilibrium? § What happens if the price is below equilibrium? 3

Ethics of Perfect Competition ¨ In what sense does perfect competition achieve distributive justice? How does it do this? ¨ How does perfect competition achieve the utilitarian goal of maximizing utility? ¨ In what ways does perfect competition protect rights? ¨ What cautions need to be kept in mind in interpreting the moral features of perfect competition? 4

Monopoly Markets ¨ What characteristics define a monopoly market? ¨ How does a company with a monopoly price its product or service? ¨ Why does a monopoly fail to achieve: § Distributive justice? § The utilitarian goal of maximizing utility? § Respect for rights? ¨ Do these failures justify government regulation of monopolies? Why? How? 5

Oligopoly Markets ¨ What characteristics define an oligopoly market? ¨ How can oligopolies affect the market? 6

Anti-Competitive Practices ¨ What is: § Price fixing? § Manipulation of supply? § Exclusive dealing arrangements? § Tying arrangements? § Retail price maintenance agreements? § Price discrimination? 7

Bribery ¨ Why might bribery be anti-competitive? ¨ In determining the ethical nature of payments other than to shut other competitors from a market, what considerations are relevant? ¨ What guidelines can be used to determine if something is a bribe or a gift? 8

Bribery ¨ Situation: § Tom is the Purchasing Manager for Cyclone Industries • Tom’s job is to buy stuff for Cyclone § § § Carol is a Salesperson for Penn Corp. Alice is a Salesperson for Omega Corp. Penn Corp. and Omega Corp. are competitors • Carol and Alice are both trying to sell to Cyclone § Penn’s bid is better than Omega’s bid § Alice offers Tom $1000 if he decides to award the deal to Omega ¨ What makes this a bribe? ¨ Is it ethical for Tom to accept the bribe? Why? 9

Case: Playing Monopoly: Microsoft ¨ What are the 2 characteristics that define a monopoly? ¨ Does Microsoft have a monopoly with the Windows operating system? ¨ In his findings of fact, Judge Jackson ruled that Microsoft has a monopoly with Windows. How did he reach that conclusion? 10

Case: Playing Monopoly: Microsoft ¨ In your opinion, did Microsoft earn their market position with Windows, or did they achieve their market position by illegal or immoral means? Explain. ¨ What is meant by tying? ¨ When Microsoft added Internet Explorer to Windows, was that good for consumers or did it harm consumers? Explain. ¨ What other allegations of anti-competitive conduct have been made against Microsoft? 11