Determining Interest Rates for First National's Consumer Checking Account
Question
First National is developing a consumer checking account that can access a line of credit. This is the first time the bank has ever had such a product, although this type of credit facility has been popular with other banks in town. To determine what interest rate to charge on this account, an officer of First National called some of his friends at other local banks offering this type of credit and asked several questions, including the interest rate charged on this type of account and what internal factors the banks use to set the rate. After obtaining this information, First National determines that it could charge approximately 2 percent more than it originally planned. Is there anything wrong with this course of action?
Answers
Explanations
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A. B. C. D.A
The course of action described involves an officer of First National contacting competitors to gather information about the interest rates charged on a similar product and the internal factors they use to set their rates. After obtaining this information, First National decides to charge a higher interest rate than originally planned.
The issue at hand is whether this course of action is appropriate or not. The answer choices suggest four different perspectives on the matter:
A. Yes. Communicating with competitors for purposes of setting prices is wrong. B. No. Communication itself is never wrong regardless of the subject matter. C. Yes. The bank should have disguised its identity in calling its competitors. D. No. The bank could probably have determined the prices eventually without calling the banks directly.
Answer choice A suggests that communicating with competitors for purposes of setting prices is wrong. This answer choice reflects the legal concept of antitrust, which prohibits competitors from colluding to set prices or limit competition. However, the situation described does not necessarily involve collusion or antitrust violations, as the information gathered was not used to coordinate pricing with competitors. Instead, it was used to determine a competitive price for a new product.
Answer choice B suggests that communication itself is never wrong, regardless of the subject matter. While communication itself is not inherently wrong, certain types of communication can be inappropriate or unethical. For example, sharing confidential information or misrepresenting oneself can be considered unethical.
Answer choice C suggests that the bank should have disguised its identity when contacting competitors. Disguising one's identity when contacting competitors is generally considered unethical, as it involves deception and could be perceived as an attempt to gather sensitive information.
Answer choice D suggests that the bank could have determined the prices eventually without contacting competitors directly. While this may be true, the information gathered from competitors may have provided valuable insights that would have been difficult to obtain otherwise.
Overall, answer choice A is not the best answer because the situation does not necessarily involve antitrust violations. Answer choice B is also not the best answer because certain types of communication can be inappropriate or unethical. Answer choice C is not the best answer because disguising one's identity when contacting competitors is generally considered unethical. Answer choice D is the best answer because while the bank could have determined prices eventually without contacting competitors directly, the information gathered from competitors may have provided valuable insights that would have been difficult to obtain otherwise.
