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0 sats \ 8 replies \ @Undisciplined 18h \ parent \ on: Free market competition - good and bad econ
They can't do the resell arbitrage, but they can do the second strategy of letting their competitor eat those losses until they can't sustain it anymore.
More broadly, there are winning competitive strategies to take when your opponent is opting for a losing strategy.
DiLorenzo has gone back through the historical records and every supposed instance of predatory pricing was bs. Most of the time, it was just an entrepreneur lowering prices permanently and when it was the actual goal it blew up in the person's face.
This would work in cases where there are low fixed costs. Unfortunately this is not always the case. Usually there is rent to pay, maintenance of machines, which is needed even if the machine is idle, also salaries of employees, especially where you can't quickly hire all the workforce at once should you want to resume the operations.
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Credit markets can handle some of that. You still won't be sustaining as many losses as the competitor who is intentionally sustaining losses, in addition to the factors you mention.
There's a reason successful cases don't show up in the historical record. Predatory pricing is just a commie boogey man.
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I think that will depend on the size difference. A large conglomerate can get into a niche with many smaller players. It can operate a few years losing money on that particular thing. And even though it is sustaining more losses than the competitor, the competitor may be limited even by the smaller losses he is sustaining.
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Again, this doesn't exist in the historical record for a reason. It's not a plausible strategy.
If it is as easy as people make it sound, why isn't it common? Every business has competitors and none are documented to have pulled this off.
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I am not sure whether it is common or not. I am just using logical deduction here.
I see quite a few actually (current, not historical), but I don't want to delude the discussion with concrete example. Concrete examples are usually complex, and different sides always interpret them in a way that supports their case.
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In that case, I've said my piece.
In a theoretical sense, it isn't plausible for reasons I've already stated.
In an empirical sense, it doesn't seem to happen, although I grant your point about real cases being messy.
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Hm... I won't comment the so called "empirical" sense, for the reason I stated. But I kind of think both of the theoretical issues that I stated were not addressed completely.
I mean for example this thing I posted:
I think that will depend on the size difference. A large conglomerate can get into a niche with many smaller players. It can operate a few years losing money on that particular thing. And even though it is sustaining more losses than the competitor, the competitor may be limited even by the smaller losses he is sustaining.
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I can't spend all my time shooting down every underspecified hypothetical situation.
In general, if one market actor is sustaining losses and selling below the market rate other factors will render that unsustainable before it yields the profit they ultimately want.
The form that takes will differ by scenario, but it will be some combination of waiting them out or finding a way to make use of the below cost product they're offering.
If the competitors don't have the capital at hand, there are others who do. That means credit might be extended in what becomes a speculative attack on the predatory pricer and it might mean the smaller players get bought out by someone who can afford to wait.
Regardless of the form it takes. The attempt at predatory pricing won't recoup the losses later by jacking up prices.