From: jwh@citi.umich.edu (Jim Howe)
Subject: Re: "Dumping"
Date: Fri, 11 Dec 92 17:01:27 EST
Organization: IFS Project, University of Michigan
Reply-To: jwh@citi.umich.edu

In article <1992Dec11.170625.15551@oakhill.sps.mot.com>, dong@oakhill.sps.mot.com (Don M. Gibson) writes:
|> In article @engin.umich.edu, jwh@citi.umich.edu (Jim Howe) writes:
|> >In article <168B9804E.KLAFF@lexmark.com>, KLAFF@lexmark.com writes:
|> >And what do you pay for a TV today vs what you paid for a TV in 1970?
|> that's not relevent (clearly)
|> 
|> >I'm not arguing that companies won't go out of business, I'm only
|> >saying that dumping as a way to 'control' a market whereby prices can
|> >be raised substantially is not an intelligent thing to do.

|> are you saying that in no case is it an intelligent thing?  if not,
|> then your argument can only be on a case by case basis.  if it is,
|> then it only takes one (1) example of where dumping "worked" to
|> prove you wrong.  

I can't use the 'never' word because there certainly exists the 
theoretical possibility that a beneficial dumping situation could
occur.  However, the probability of that ever happening is so
small that I can't see why any company would waste money trying
to achieve this theoretical situation.

|> 
|> going back 60 years or so, i would say that GM engaged in preditory 
|> practices at that time.  they ended up with 50% of the US market share.
|> does anyone argue with the fact that GM was in fat city in the early
|> 70's??  
|> 

50% is certainly not a monopoly.  'Mono' means 1.  The fact that GM
had 50% of the market meant that some other companies had the other
50%.  Dumping (or predatory pricing) would stipulate that a company
would undercut prices of its competitors so as to drive them out of
business and assure themselves a monopoly position where they could
raise prices substantially to recoup the initial losses.  If GM
had engaged in predatory pricing, it certainly didn't get them
a monopoly position, and it certainly didn't let them charge whatever
they wanted for a car.  Also notice how well GM has stood to
competition.  GM is now suffering for past mistakes.  Competition,
particularly from foreign markets has forced GM to work to become
a more efficient competitor, and build a better, higher quality car.

|> when GM was undercutting small manufacturers and dealers in the 30's,
|> it was dandy for consumers.  GM made up for with 30 years of 
|> killer profits.  perhaps that was dumb--NOT.  perhaps consumers made
|> out in the long run--??
|> 

Who cares if GM made 'killer' profits.  If you check the price of
a car, you will find that they never became outrageosly high.

|> >Dumped products certainly are a good value.  You seem to think that
|> >they won't be in the future.  Why?  Do you think that the prices of
|> >these products will rise above some reasonable level?  In the cases
|> >you have mentioned, prices have decreased, not increased.  Dumping
|> >as a means to control a market and charge monopoly prices has never
|> >been successful.  We benefit because we pay lower than usual prices
|> >now and the worst case is that we pay normal prices later.  That is
|> >certainly better than paying higher prices all along.
|> >
|> 
|> think.   cars were cheaper (adjusted) in the 70's than the turn
|> of the century?  does that mean cars were cheap??  clearly not.

And your point is?  My point is this, would you rather pay $1000 (in
constant dollars) for a given product over a span of time, or would
you prefer to pay less than $1000 and eventually pay $1000?  Think
of the $1000 as the 'normal' price and anything less than that is
a 'dumping' price.


James W. Howe                  internet: jwh@citi.umich.edu
University of Michigan             uucp: uunet!mailrus!citi.umich.edu!jwh
Ann Arbor, MI   48103-4943         
Newsgroups: sci.econ