According to the Cahner's In-Stat Group, the number of worldwide wireless phone subscribers will soon reach the 1 billion mark. In the United States alone, the number of wireless subscribers is projected to grow by almost 17 million subscribers per year for the next five years. Contributing to the extensive growth are lower prices, larger geographic coverage, prepaid services, Internet enabled phones. While the actual costs of a basic wireless phone is about $75, most wireless carriers offer their customers a "free" phone with a one year wireless service agreement.

Is this pricing strategy rational? Explain.