a tie-in sale occurs when course hero

Why is selling insurance important?

selling insurance products and services is one of the most important activities of an insurance producer as its essential to sustain the livlihood of the agency and brokerage. Commission on business sold is the principal source of income for producers and the ownership of policy expirations for the agency.

What is insurance company?

a business, operated for the benefit of its owner (s) that sells insurance, usually as a representative of several unrelated insurance companies.

What is the duty of accounting?

Under the duty of accounting, the agent is responsibile to the principal for all of the principal's money and property that comes into the agent's possession. 5. Keep the principal informed of all facts relating to the agency relationship.

What is the duty of the principal to pay the agent for services performed?

the principal's duty to pay the agent for services performed requires the insurance company to pay commissions and other specified compensation to the agent for the insurance the agent sells or owns.

What is an agency contract?

agency contract/agreement. a written agreement between an insurance company and an agent that specifies the scope of the agent's authority to conduct business for the insurance company - gives the agent the right to represent the insurance company and to sell insurance on their behalf. what are the 5 legal responsibilities ...

What does "expire" mean in insurance?

the record of an insurance agency's present policyholders and the dates their policies expire. If the insurance company ceases to do business with an agency, the agency has the right to continue doing business with its existing customers by selling them insurance with another company.

What is actual authority?

Actual Authority. Authority granted by the principal on an agent under an agency contract. Apparent authority. a third party's reasonable belief that an agent has authority to act on the principal's behalf. Independent agency and brokerage marketing system.

Why were antitrust laws created?

14. Antitrust laws were created to give government the power to

What is the meaning of "if the largest four firms in an industry control less than half the market"?

17. If the largest four firms in an industry control less than half the market, their competitive

What is the fundamental belief behind the market oriented US economy?

16. The fundamental belief behind the market-oriented US economy is that firms are in the best

How can tie-in sales reduce risk?

A well-known example which can be used to illustrate how risk may be reduced by tie-in sales was the tying of cards to tabulating machines by the IBM Corporation. Assume IBM sells these services (both machines and cards) to the accounting industry. Assume also that the mean performance of the accounting industry may be predicted (by IBM, say) with high precision, although an individual firm’s performance is likely to be much less predictable. If firm specific performance is randomly distributed, each firm should expect its performance to equal the industry average. Risk averse firms would invest less than risk neutral firms in projects whose payoffs are dependent on firm specific performance. 10

How would price discrimination be confirmed?

In a world where sales were predicted costlessly, which would rule out the risk-reduction scenario, confirmation of the price discrimination hypothesis could occur if the elasticity of demand for jointly produced services were known for both intensive and moderate users prior to the tie-in. If the movement in relative prices caused by the tie-in conformed with the predictions of the price-discrimination hypothesis, it would provide strong evidence in its favor. If not, some other explanation would have to be sought. In a world where sales were not predicted costlessly, so that risk reduction could not be ruled out, distinguishing between these two hypotheses would prove extremely difficult because the risk feared by consumers would be essentially the risk of paying high prices for services, but paying high prices also tends to cause a more elastic demand for a product. Therefore a tie-in would have the impact of jointly lowering risk and lowering prices to those most likely to have elastic demands for services and would appear consistent with either explanation.

What is the standard analysis of a tie-in?

The standard analysis Is that the tie-in raises the ‘implied price’ of the tying good to the intensive user relative to the less intensive user since the intensive user uses more of the now higher priced (profit generating) tied goods. As one would expect, It Is possible (though awkward) to cast the results of this paper in terms of the standard analysis.

What is tied good?

The tied good. . . serves very much as a metering device. The tying arrangement results in streams of payments flowing from the users of the machines to its seller with the rate of flow being directly proportional to the intensity of use of the machine. Those using the machine more intensively are paying more; price discrimination is being achieved. 6

What is price discrimination?

Price discrimination occurs when a producer charges different prices for the same good to different individuals when there is no cost justification for doing so. Technically, price discrimination exists if P 1 /MC 1 ¹ P 2 /MC 2, where prices and marginal costs refer to identical items sold to different individuals. It is well known that profitable price discrimination requires that the higher price (relative to MC) be charged to the less elastic demander. If a pricing practice raises the price to the more elastic consumers, unprofitable price discrimination will occur.

What is a tie in sale?

A tie-in sale results from a contractual arrangement between a consumer and a producer whereby the consumer can obtain the desired good (tying good) only if he agrees also to purchase a different good (tied good) from the producer. While the courts have usually considered such pricing arrangements as an extension of monopoly from the market for the tying good to the tied-good market, 1 economists have generally rejected this view, preferring instead to view the tie-in from the perspective of alternative hypotheses: 2 (1) the tie-in is a substitute for a lump sum payment tailored to extract the consumer’s surplus in the tying good market; (2) the tie-in ensures the quality of the tied-good when the tied good is used in conjunction with the tying good; (3) the tie-in monitors cheating in a cartel producing the tied good; 3 (4) the tie-in permits evasion of price controls; (5) the tie-in serves to price discriminate among types of consumers having different demand elasticities; (6) the tie-in reduces the risk to consumers.

What happens when two heterogeneous firms of the same size use different amounts of the service?

For example, if two heterogeneous firms of the same size use different amounts of the service, the user of the larger quantity also spends a higher percentage of his resources on these services.