Inside dumping theory: Austrian perspectives on the cost problem

Predatory price strategy leads - according to neoclassical cost theory- to resource misallocation and eventually strengthens the market position of the predator until he becomes a monopolist. When the monopoly position is achieved, it is said that output is restricted and prices increase; government...

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Bibliographic Details
Published in:The review of social and economic issues 2017-04, Vol.1 (4), p.44
Main Authors: Stamate-Stefan, Andreas, Mihaela, Iacob, Smirna, Tudor
Format: Article
Language:English
Subjects:
Austrian school (Economics)
Competition
Competition (Economics)
Consumers
Costs
Dumping
Economic research
Economic theory
Economists
Entrepreneurs
Market positioning
Positivism
Predatory pricing
Preferences
Price cutting
Prices
Pricing policies
Research methodology
Studies
Universalism
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Summary:Predatory price strategy leads - according to neoclassical cost theory- to resource misallocation and eventually strengthens the market position of the predator until he becomes a monopolist. When the monopoly position is achieved, it is said that output is restricted and prices increase; government intervention is supposedly needed to prevent the so called negative effects of predatory pricing. Neoclassical assumptions in competition theory also serve as basic principles for the legal standards. In the present work, we assume an alternative cost theory, consistent with the Austrian approach in economics. The substance of this theory is that selling below costs can be a perfectly normal business practice and also beneficial for consumers, while outlawing it can determine a negative change in entrepreneurs' incentives structure and induce a disruption between them and consumers.
ISSN:2360-378X