If a tire manufacturer agrees to sell its tires to an automobile producer on the contractual condition that the automobile producer purchases 100 percent of its tires needed from the tire manufacturer, this is an example of_____ .
A)a tying arrangement
B)an exclusive dealing contract
C)a requirements contract
D)a horizontal contract

Question

Quizplus · Accepted Answer

This is a requirements contract, as it sets a requirement for the automobile producer to purchase 100 percent of its tires from the tire manufacturer. It is not a tying arrangement, as there is no requirement to purchase a second product in addition to the tires. It is also not an exclusive dealing contract, as there is no exclusivity requirement in the contract. A horizontal contract would involve agreements between competitors at the same level of the supply chain.

If a Tire Manufacturer Agrees to Sell Its Tires to an Automobile