PTP #11

From Milton Friedman

It has been argued that the automobile industry is irrational to object to the requirements for safety belts, pollution equipment, etc., on cars because these requirements have the effect of giving the automobile firms captive customers. Every purchaser of a car must also buy safety belts, and it must buy that belt from the firm from which it buys the car. Hence, automobile producers are given a monopoly position with respect to the required items.

Under what conditions, if any, is the argument valid? Invalid?

Source: Milton Friedman, Price Theory (Aldine Publishing Company), pp. 339–340

Topics: monopoly , regulation , bundling