11 ms·

Genuine question: is it safe to assume that dumping is bad for consumers? It's clearly bad for competitors, but it's basically like handing out free money to co

by karzeem 10y ago

Genuine question: is it safe to assume that dumping is bad for consumers? It's clearly bad for competitors, but it's basically like handing out free money to consumers. The concern is that once all the competitors die, the dumper will have a monopoly and jack prices up. But empirically, what are some examples of that happening? With few exceptions, it's only possible for monopolies to sustain above-market prices when laws block new competitors from starting up.

sdenton4 10y ago
Look towards video rental back in the nineties. Blockbuster would move into a town, give very cheap rentals until the moon and pop stores went under, and then raise prices.
- Merem 10y ago
  In a town here, we had basically the same with a doner kebab shop. The chain moved in, priced the doner at 1.20€ (local was 2.20€ which was already cheap), killed the competition after a few months and then raised prices to 3.50€.
- exclusiv 10y ago
  Yeah video games were especially bad. I think they got up towards $8 a rental before they went under.
- p4wnc6 10y ago
  The interesting thing in the case of Uber/Lyft/etc. is that the end goal would almost have to be a situation in which on-demand ride sharing applications became nearly the sole mode of transit in the regions of interest. Otherwise, literally as soon as you drive out all the other transit competitors (taxi companies, other ride-sharing services, whatever) and begin to apply monopolistic prices, there will be a huge flood of lower-priced alternate options, like taxi companies popping up again. For me, this is what's so scary about Uber. It's not "disruption" as many people seem to claim. It's engineered regulatory capture. The goal isn't to disrupt a market, but rather to wipe it out and have the financial and political backing to secure some sort of regulatory environment in which lower-priced options cannot emerge after the VC-subsidy phase ends and the monopolistic price increases begin. It's double sad that as the sort of flagship start-up of the era, Uber leads the way in deplorable executive behavior, shady business practices, and questionable labor policies ... and despite it, they've managed to win the PR war that has every naive tech youngster singing about how they are "disruptive" and singing how all criticisms against them are invalid because of precious, precious "disruption."
  - serge2k 10y ago
    It seems to be coming around a bit, but people still talk about "taxi monopolies" and whine about how awful cities like Austin and Vancouver are to block Uber.
cousin_it 10y ago
If a monopoly keeps prices high, but has deep enough pockets to temporarily lower prices and put any competitor out of business, then no competitors will arise.
- karzeem 10y ago
  This is an interesting angle. Are there examples of it actually happening?
  - patrickaljord 10y ago
    There are no examples. Social/price dumping is the big boogie man here in Europe used to regulate, tax, sue or just plain forbid foreign companies from competing aggressively against local companies. Branding the permanent menace of social/price dumping is just cronyism and protectionism in disguise, it hurts customers, innovation and employment. I hate it when populists and even regular politicians uses it and I hate it even more when people buy it, really makes me cringe but there's nothing I can do I guess.
    - dragontamer 10y ago
      I dunno about European History, but here in the US, every child is taught the lesson of the monopoly era. Rockefeller Oil, J.P. Morgan Steel / US Steel, Tobacco Trust, etc. etc. These companies monopolized the industry in the late 1800s and fixed-prices to kill competitors.
      - hibikir 10y ago
        In the Spain of my youth, the regulation was way past avoiding a monopoly in commodities, and full on to protecting any incumbents on anything, like mom and pop retail. One example was (and maybe still is), to ban discounts on textbooks, as the big margins were a big reason small bookstores stayed afloat. Another was is to limit hours of operations in stores, including making stores be closed on sunday being mandatory, as many family retailers just couldn't man the store without hiring someone, and labor laws made hiring someone for little time expensive. There was also a semi-recent outcry when the government stopped regulating rent hikes. for commercial property. There were plenty of stores in highly desirable locations that were on the same lease for a century! Their monthly rent could be two orders of magnitude away from the space next door. Such level of protectionism of old business models just means that instead of going through pain and optimization for decades, they all get wiped off the map in one fell swoop the minute competition that can skirt the protectionist regulations comes in: Imagine what happens to tiny stores when, instead of first having to compete with US levels of efficiency in big box stores, they get to compete with Amazon. What happens to record stores that can get away with selling music for 25+ euros an album when spotify shows up? So, while there is reason in fearing monopolies, the levels of regulation I describe just have little to do with what the US calls anti monopoly regulation.
andyidsinga 10y ago
in addition, uber may be getting rid of one kind of competitor that has a hard time competing with it while laying the ground work for other low-end entrants to compete with it. I really love seeing cars around town with both uber and lyft signs in the windows. ..I can imagine a sign with 8 of these.
melvinmt 10y ago
While Uber competes with Lyft directly in the on demand rides space it by no means will gain a monopoly on all transportation, there are multiple levels of competition after all. So I don't believe we'll end up in a monopoly situation soon where we have to pay whatever Uber demands. If Uber gets too expensive (similar to how they started with pricey black car service), consumers will simply resort to alternative ways of transportation.
aaroninsf 10y ago
> With few exceptions, it's only possible for monopolies to sustain above-market prices when laws block new competitors from starting up. This is false. The 'exceptions' are the norm. It's all but tautological that monopolies can only be established in markets in which there are meaningful barriers to entry. Those barriers are seldom legal, and legal barriers are of arguably limited value. The only way for a 'start up' to 'disrupt' is if they are extremely well funded relative to the monopoly holder's investment in the market. As noted elsewhere today, that is precisely the business model of Uber/Lyft/AirBnB: use vast amounts of capital to attempt to break into locked markets, while unprofitable for years and years. Absent funding at that level, monopolies that level are largely unassailable once established. The pace of breaking them and evolving the market in the interest of consumers is thus measured on a very very long timescale, during which consumers take it in the shorts. (Witness taxi service in SF pre-Uber/Lyft)
- karzeem 10y ago
  What are some good examples of sustained monopolies in markets that aren't heavily regulated?
forgetsusername 10y ago
>The concern is that once all the competitors die, the dumper will have a monopoly and jack prices up I'm not sure how relevant it is to ride-sharing, because the industry is not particularly vital to the economy, and the barrier to entry is low. Where it becomes a concern is in crucial industrial infrastructure. Over the long term, China, for example, can dump cheap, government subsidized steel in the US, obliterating the domestic steel industry. 40 years down the road there's nowhere else to buy steel, which is bad both economically and militarily.

by karzeem 10y ago

sdenton4 10y ago

Look towards video rental back in the nineties. Blockbuster would move into a town, give very cheap rentals until the moon and pop stores went under, and then raise prices.

Merem 10y ago
In a town here, we had basically the same with a doner kebab shop. The chain moved in, priced the doner at 1.20€ (local was 2.20€ which was already cheap), killed the competition after a few months and then raised prices to 3.50€.
exclusiv 10y ago
Yeah video games were especially bad. I think they got up towards $8 a rental before they went under.
p4wnc6 10y ago
The interesting thing in the case of Uber/Lyft/etc. is that the end goal would almost have to be a situation in which on-demand ride sharing applications became nearly the sole mode of transit in the regions of interest. Otherwise, literally as soon as you drive out all the other transit competitors (taxi companies, other ride-sharing services, whatever) and begin to apply monopolistic prices, there will be a huge flood of lower-priced alternate options, like taxi companies popping up again. For me, this is what's so scary about Uber. It's not "disruption" as many people seem to claim. It's engineered regulatory capture. The goal isn't to disrupt a market, but rather to wipe it out and have the financial and political backing to secure some sort of regulatory environment in which lower-priced options cannot emerge after the VC-subsidy phase ends and the monopolistic price increases begin. It's double sad that as the sort of flagship start-up of the era, Uber leads the way in deplorable executive behavior, shady business practices, and questionable labor policies ... and despite it, they've managed to win the PR war that has every naive tech youngster singing about how they are "disruptive" and singing how all criticisms against them are invalid because of precious, precious "disruption."
- serge2k 10y ago
  It seems to be coming around a bit, but people still talk about "taxi monopolies" and whine about how awful cities like Austin and Vancouver are to block Uber.

cousin_it 10y ago

If a monopoly keeps prices high, but has deep enough pockets to temporarily lower prices and put any competitor out of business, then no competitors will arise.

karzeem 10y ago
This is an interesting angle. Are there examples of it actually happening?
- patrickaljord 10y ago
  There are no examples. Social/price dumping is the big boogie man here in Europe used to regulate, tax, sue or just plain forbid foreign companies from competing aggressively against local companies. Branding the permanent menace of social/price dumping is just cronyism and protectionism in disguise, it hurts customers, innovation and employment. I hate it when populists and even regular politicians uses it and I hate it even more when people buy it, really makes me cringe but there's nothing I can do I guess.
  - dragontamer 10y ago
    I dunno about European History, but here in the US, every child is taught the lesson of the monopoly era. Rockefeller Oil, J.P. Morgan Steel / US Steel, Tobacco Trust, etc. etc. These companies monopolized the industry in the late 1800s and fixed-prices to kill competitors.
    - hibikir 10y ago
      In the Spain of my youth, the regulation was way past avoiding a monopoly in commodities, and full on to protecting any incumbents on anything, like mom and pop retail. One example was (and maybe still is), to ban discounts on textbooks, as the big margins were a big reason small bookstores stayed afloat. Another was is to limit hours of operations in stores, including making stores be closed on sunday being mandatory, as many family retailers just couldn't man the store without hiring someone, and labor laws made hiring someone for little time expensive. There was also a semi-recent outcry when the government stopped regulating rent hikes. for commercial property. There were plenty of stores in highly desirable locations that were on the same lease for a century! Their monthly rent could be two orders of magnitude away from the space next door. Such level of protectionism of old business models just means that instead of going through pain and optimization for decades, they all get wiped off the map in one fell swoop the minute competition that can skirt the protectionist regulations comes in: Imagine what happens to tiny stores when, instead of first having to compete with US levels of efficiency in big box stores, they get to compete with Amazon. What happens to record stores that can get away with selling music for 25+ euros an album when spotify shows up? So, while there is reason in fearing monopolies, the levels of regulation I describe just have little to do with what the US calls anti monopoly regulation.

andyidsinga 10y ago

in addition, uber may be getting rid of one kind of competitor that has a hard time competing with it while laying the ground work for other low-end entrants to compete with it. I really love seeing cars around town with both uber and lyft signs in the windows. ..I can imagine a sign with 8 of these.

melvinmt 10y ago

While Uber competes with Lyft directly in the on demand rides space it by no means will gain a monopoly on all transportation, there are multiple levels of competition after all. So I don't believe we'll end up in a monopoly situation soon where we have to pay whatever Uber demands. If Uber gets too expensive (similar to how they started with pricey black car service), consumers will simply resort to alternative ways of transportation.

aaroninsf 10y ago

> With few exceptions, it's only possible for monopolies to sustain above-market prices when laws block new competitors from starting up. This is false. The 'exceptions' are the norm. It's all but tautological that monopolies can only be established in markets in which there are meaningful barriers to entry. Those barriers are seldom legal, and legal barriers are of arguably limited value. The only way for a 'start up' to 'disrupt' is if they are extremely well funded relative to the monopoly holder's investment in the market. As noted elsewhere today, that is precisely the business model of Uber/Lyft/AirBnB: use vast amounts of capital to attempt to break into locked markets, while unprofitable for years and years. Absent funding at that level, monopolies that level are largely unassailable once established. The pace of breaking them and evolving the market in the interest of consumers is thus measured on a very very long timescale, during which consumers take it in the shorts. (Witness taxi service in SF pre-Uber/Lyft)

karzeem 10y ago
What are some good examples of sustained monopolies in markets that aren't heavily regulated?

forgetsusername 10y ago

>The concern is that once all the competitors die, the dumper will have a monopoly and jack prices up I'm not sure how relevant it is to ride-sharing, because the industry is not particularly vital to the economy, and the barrier to entry is low. Where it becomes a concern is in crucial industrial infrastructure. Over the long term, China, for example, can dump cheap, government subsidized steel in the US, obliterating the domestic steel industry. 40 years down the road there's nowhere else to buy steel, which is bad both economically and militarily.