I do not believe that predatory pricing is a big deal. Rockefeller became succesful not because of his pricing moves but rather because his product was superior. He was unable to secure his position with predatory pricing alone. However, let us assume that there is a monopolist who decides to drive out all of his competitors by making ridiculously low prices. I believe, in a free market, what will happen is that the speculators will take advantage of his. They will buy low and sell for more later in the future when the monopolist increases his prices. The monopolist will be in a prepetual war against the speculators, and he would eventually lose out to them. He will have to try a different tactic to secure his monopoly. So it is the speculators, one of the more hated members of society, surprisingly, that come to our rescure.
I was recently in a discussion about Standard Oil. Standard Oil was successful because it was able to reduce the cost of its products through greater efficiency. By being extremely efficient, Standard Oil increased its market share. Although some try to claim that Standard Oil had total control of the market, Standard Oil had many competitors and was able to reduce the price of its products, benefitting consumers. Standard Oil was not engaging in predatory pricing. The company increased its efficiency to such an extent that it was able to sell for a much lower price and still be profitable, which pushed some less efficient firms out of the market, increasing Standard Oil’s market share.
The use of predatory pricing to increase market share is a myth. If a firm were to sell for lower prices than production, it would be accepting a loss. Nothing keeps other firms from lowering their prices to accept a loss. This type of competition cannot be sustained for long and is detrimental to all firms engaging in this activity. If predatory pricing was used and other firms could not compete, they would shut down and reenter the market when the monopoly firm raised its prices.
Even without speculators in markets for commodities, it is not possible to maintain a monopoly without government help in any business. Look at automobiles: Who could have conceived in 1969 that GM would be completely owned by the govenrment just to keep union workers working and that Toyota would become the largest automobile maker in the world and in the USA? Who would have thought that its toughest competitors are Korean and soon to be Chinese?
This is an endless discussion topic.
Always those questions about the “rules of the game” will be kept on asking over and over.
The vital question here is:
Should predatory pricing be left to the wild free market (assuming it is good for the market) or be controlled and regulated (assuming it is bad for the market)???
I think it has to be regulated and looked over.
Should predatory pricing be left to the wild free market (assuming it is good for the market) or be controlled and regulated (assuming it is bad for the market)???
I think it has to be regulated and looked over.
Yeah, we certainly don’t want consumers benefiting from lower prices. Poor people are greedy.
Show me one example where a monopoly was secured through “predatory pricing” (which, by the way, is a pathetically arbitrary description to begin with). I’ll save you the trouble, you can’t. It’s never happened. See Dominick Armentano’s Monopoly and Antitrust and stop applying fairy tales and mythology to economic discussions.
We do not speak the same language my friend.
I never addressed the issue of monopoly and your assumptions “Yeah, we certainly don’t want consumers benefiting from lower prices. Poor people are greedy.” I cant see why you brought them up.
Please read what I wrote again if you wish to make a discussion about it.
Lewis S. wrote the following post at Tue, Jun 29 2010 10:52 AM:
Should predatory pricing be left to the wild free market (assuming it is good for the market) or be controlled and regulated (assuming it is bad for the market)???
I think it has to be regulated and looked over.
Yeah, we certainly don’t want consumers benefiting from lower prices. Poor people are greedy.
Show me one example where a monopoly was secured through “predatory pricing” (which, by the way, is a pathetically arbitrary description to begin with). I’ll save you the trouble, you can’t. It’s never happened. See Dominick Armentano’s Monopoly and Antitrust and stop applying fairy tales and mythology to economic discussions.
Then explain why it needs to be “regulated and looked over.”
That is a personal opinion. I think it has to be done that way.
Lewis S. wrote the following post at Tue, Jun 29 2010 11:54 AM:
Then explain why it needs to be “regulated and looked over.”
Okay, let’s try it this way: Are you saying that predatory pricing is bad? If so, why? And who should regulate it?
I don’t think that is the question you want to ask. “The market” is simply the result of people acting freely to further their ends. The only thing that is good for the market is maintaining that freedom. The only thing bad for the market is curtailing it, which is what you propose to do as a solution. It’s a self-defeating proposition.
I think you mean to say this: “Should predatory pricing be left to the wild free market (assuming it is good for some subset of actors in the market) or be controlled and regulated (assuming it is bad for some subset of actors in the market)?” To argue that question would require defining the subset of actors in the market you are trying to assist, which invariably leads to the unintended consequences of regulatory action, not to mention the general violation of property rights and aggressive action required to foist your will upon the unassisted subset of actors.
Your statements require further elaboration to have any potential merit. Surely you have some rationale behind why you think it must be that way?
I think is bad because it drives competitors out of the market at the expense of the consumer. If there is only one seller the consumer has no choice but to buy from the only seller. Predatory pricing is one of the many tools a firm could use to prevent any other firm from entering their territory. I believe in quality or cost competiveness only. Who regulates it?? I don’t care but it has to be regulated.
Obviously you can try to prove me wrong. I think that’s why you keep on asking me anyways.
Lewis S. wrote the following post at Tue, Jun 29 2010 12:11 PM:
Okay, let’s try it this way: Are you saying that predatory pricing is bad? If so, why? And who should regulate it?
You leave me without words. I don’t speak radicalism, extremism and absolutism.
See you around.
cporter wrote the following post at Tue, Jun 29 2010 12:22 PM:
I don’t think that is the question you want to ask. “The market” is simply the result of people acting freely to further their ends. The only thing that is good for the market is maintaining that freedom. The only thing bad for the market is curtailing it, which is what you propose to do as a solution. It’s a self-defeating proposition.
Prior to regulation, give an example where this has happened (predatory pricing driving out competitors while harming consumers).
I don’t mean to be disrespectful, but can you give me an example or guarantee that it would not happen if predatory pricing would be allowed???
Lewis S. wrote the following post at Tue, Jun 29 2010 12:32 PM:
Give an example where this has happened (predatory pricing driving out competitors while harming consumers).
There are no gaurantees in life. Human beings have free (enough) will. The only thing we can do is choose a system that minimizes these risks.
No. I cannot give you a guarantee. Nor can I give you a guarantee that, if we were to repeal laws against space monkeys shooting us with their ray guns that that wouldn’t happen either.
I am asking you to support your assertion that predatory pricing has done what you say. If you cannot, then perhaps you might rethink the position.
You leave me without words. I don’t speak radicalism, extremism and absolutism.
See you around.
The burden of proof is on you to justify violence (in the form of price controls). If you agree that violence can only be used in response to violence, I guess you are saying that best serving consumers (by giving the lowest prices, AKA “predatory pricing”) is violent.
Before you write make sure to think and to read yourself. I am free, I can make any assertion i want & write it anywhere. I am not in the business of convincing anyone to accept my ideas, I am used to debate as a free man. On the other hand you are intolerant; you seek the unseekable & reject any other idea than those coming from your radical libertarian books.
And if you can not support your position either then why bother???
Lewis S. wrote the following post at Tue, Jun 29 2010 12:40 PM:
No. I cannot give you a guarantee. Nor can I give you a guarantee that, if we were to repeal laws against space monkeys shooting us with their ray guns that that wouldn’t happen either.
I am asking you to support your assertion that predatory pricing has done what you say. If you cannot, then perhaps you might rethink the position.
Dude are you nuts??. What violence??? Stop your intellectual dramatic position.
E. R. Olovetto wrote the following post at Tue, Jun 29 2010 12:47 PM:
You leave me without words. I don’t speak radicalism, extremism and absolutism.
See you around.
The burden of proof is on you to justify violence (in the form of price controls). If you agree that violence can only be used in response to violence, I guess you are saying that best serving consumers (by giving the lowest prices, AKA “predatory pricing”) is violent.
What position do I need to support? That predatory pricing has never driven out competitors while harming consumers? Can you prove a negative? Logic 101 anyone?
Am I to prove that it wouldn’t happen absent a law? Are you serious? Why don’t you prove that Earth won’t be consumed by an asteroid if I don’t wear my lucky underwear? Come on…
You made the assertion. You are being asked to support it. Instead of answering, you are being evasive and melodramatic. Just answer the question and provide an example.