Comment by JumpCrisscross
1 day ago
> Offering goods or services below the cost of their production is often illegal, though. It's called "dumping"
No.
Dumping is an international-trade term. It doesn’t even require pricing below cost, just aiming “to increase market share in a foreign market by driving out competition and thereby create a monopoly situation where the exporter will be able to unilaterally dictate price and quality of the product” [1].
Loss leaders are common in commerce and entirely legal, as are free trials. I struggle to think of a competent jurisdiction that bans them.
I'm sorry, my fault. I studied economics in Russia, and the term "dumping" was used in a more general sense as "selling goods or services below their cost".
Russian laws officially use the term "monopolistically low prices", and prohibit them if the entity engaging in such pricing holds a dominating presence in the market (and not necessarily for the goods that are being underpriced).
A correct term for the US is "predatory pricing", and it's also prohibited by the Sherman Act. For much the same reason, a large entity can destroy competition by accepting losses from selling goods below the cost. The border between loss leaders and predatory pricing is, as usual, very blurred.
> I studied economics in Russia, and the term "dumping" was used in a more general sense as "selling goods or services below their cost"
Oooh! Do you have a recommendation for a translation of a Russian economics text? I’m particularly curious of Soviet-era texts that work on theory without prices.
> correct term for the US is "predatory pricing", and it's also prohibited by the Sherman Act
Sherman prohibits the “restraint of trade or commerce” [1]. The word “price” never appears in its text. In practice, predatory pricing is a tightly-regulated term that doesn’t generally prohibit selling goods below cost
[1] https://www.govinfo.gov/content/pkg/COMPS-3055/pdf/COMPS-305...
> Oooh! Do you have a recommendation for a translation of a Russian economics text? I’m particularly curious of Soviet-era texts that work on theory without prices.
I don't think they exist? The Soviet Union used prices internally as an accounting tool. It essentially had two separate currencies: the actual physical currency that regular people owned and the virtual "accounting" currency. The accounting currency could not be converted into the real one, except for salary payments that were tightly regulated.
Once the USSR allowed some inter-conversion channels in the early 80-s its economy predictably got blown up as a result.
> Sherman prohibits the “restraint of trade or commerce” [1]. The word “price” never appears in its text. In practice, predatory pricing is a tightly-regulated term that doesn’t generally prohibit selling goods below cost
The Sherman Act is a framing law that establishes the authority to regulate monopolies, and it's on purpose rather vague in its wording.
A more concrete law here is the Robinson-Patman Act, which prohibits illegal price discrimination, including pricing substantially similar goods differently for different purchasers.
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