While the actual cost of a smart-phone is about $300, wireless carriers in some countries offer their customers a “free” smart-phone with a two-year wireless service agreement. Is this pricing strategy rational? Explain.

According to International Data Corporation (IDC), the number of worldwide smart-phone owners will soon exceed 1.5 billion. That number is expected to grow at nearly 10 percent per year for the next five years. While the actual cost of a smart-phone is about $300, wireless carriers in some countries offer their customers a “free” smart-phone with a two-year wireless service agreement. Is this pricing strategy rational? Explain.

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