There is nothing wrong with “predatory pricing”. If a compnay is selling its product below production cost, then the consumer gains by is getting something for free. Eventually the competitors on the margin will go bust, and if all competitors went bust.. the company would be able to make the price higher again.. if it made it real high, new competitors would enter the market again.. to get a piece of the profitable market. And the company would have to lower prices again below cost of production.. and again the consumer would benifit. You see, it just does not make business sense to make a loss selling below producton cost just to be able to make profit later.. because the company would always be atacked by new competitors undercutting its high prices, there would always be another company that had to be starved to death.. and in the meantime consumers would be getting stuff for free. Noone ever got rich giving stuff away for free.. and if some company is giving away something for free.. we as consumers should be thankful that this company is so foolish.
Only starting with version 4. I purchased Netscape 2.1 on 3.5" floppies at Best Buy in 1996, and then 2 months later I purchased 3.0 on CD at Best Buy.
I heard someone say that in their town a large department store started selling gasoline at a ‘predatory price’, not to try to eventually make a profit on gasoline, but to bring in customers who would then do the rest of their shopping there. Is this a way around the normal logic used against ‘predatory pricing?’ They aren’t doing it to be able to eventually charge monopoly prices on gasoline–presumable they intend to perpetually lose money on the gasoline sales, but make up for it in the resulting larger market share for all of the other goods they sell.
The person who told me this said his town passed an ordinance blocking the store from continuing this strategy.
That’s not predatory pricing - that’s what they call a loss leader. It’s “get them in here with the cheap price on this, and make the money back on everything else that they buy”.
Based on how many times I’ve seen this strategy, I’d have to guess that it’s workable - every supermarket I know uses this to bring customers into the door.
It is not, unless the goal is to burn the competition out of business, predatory pricing.