Asked by Pratik Sanyal on May 06, 2024
Verified
Horizontal contracts often
A) Increase competition between substitute products
B) Eliminate competition between substitute products
C) Do not change the competition between substitute products
D) None of the above
Substitute Products
Goods or services that can serve as replacements for each other, satisfying similar customer needs or desires.
Competition
The rivalry among businesses to attract customers and achieve higher sales, profits, and market share.
- Discern the effects of vertical and horizontal integration on financial performance and market competition.
Verified Answer
ZK
Zybrea KnightMay 11, 2024
Final Answer :
B
Explanation :
Horizontal contracts are agreements between firms that are at the same level of the supply chain, such as two competing retailers or two suppliers of a single component. Such contracts often include clauses that limit competition between the parties by prohibiting one party from selling to or buying from a competitor, and these clauses can have the effect of reducing competition between substitute products. Therefore, the correct answer is B, which states that horizontal contracts eliminate competition between substitute products.
Learning Objectives
- Discern the effects of vertical and horizontal integration on financial performance and market competition.