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Do you have an example of a company undercutting prices to kill competition and then later raising prices? Gmail is still free. I'd worry about a company esta

Do you have an example of a company undercutting prices to kill competition and then later raising prices? Gmail is still free. I'd worry about a company establishing a monopoly by using government coercion. It seems to me a company that figures out how to improve my standard of living by offering services free is a good thing.

newt0311 19y ago
Using very low prices to undercut competition and then later raising prices only works where there is some way to lock customers in. Japanese companies do it all the time (they have exclusive contracts to provide lock-in). This is extremely common in game consoles because the dominant console will have the most games which will tend to make it stay as the dominant console. In general, anything with high switching costs can make use of this. (Phone and cable companies also used to do this). I would argue that these kind of monopolistic practices are bad for the economy but should only be dealt with after it can be proven that a monopoly exists. Thats because government stifling of beneficial businesses is a far bigger danger than monopolies.
- dkokelley 19y ago
  Using very low prices to undercut competition and then later raising prices only works where there is some way to lock customers in. Exactly. That's why many utilities (water, gas, electricity) are granted government-sanctioned monopolies on their products or services. The infrastructures required to provide these utilities are so great that competition is near impossible.
cstejerean 19y ago
IIRC GMail isn't exactly making money for Google. I never thought about it before reading this, but I can see GMail being offered for free to drive people away from Yahoo and Hotmail. Chances are once you're on Google services you're more likely to use Google Search (which is where the money lies). For example look at the nicely placed Search the Web box at the top of GMail.

newt0311 19y ago

Using very low prices to undercut competition and then later raising prices only works where there is some way to lock customers in. Japanese companies do it all the time (they have exclusive contracts to provide lock-in). This is extremely common in game consoles because the dominant console will have the most games which will tend to make it stay as the dominant console. In general, anything with high switching costs can make use of this. (Phone and cable companies also used to do this). I would argue that these kind of monopolistic practices are bad for the economy but should only be dealt with after it can be proven that a monopoly exists. Thats because government stifling of beneficial businesses is a far bigger danger than monopolies.

dkokelley 19y ago
Using very low prices to undercut competition and then later raising prices only works where there is some way to lock customers in. Exactly. That's why many utilities (water, gas, electricity) are granted government-sanctioned monopolies on their products or services. The infrastructures required to provide these utilities are so great that competition is near impossible.

cstejerean 19y ago

IIRC GMail isn't exactly making money for Google. I never thought about it before reading this, but I can see GMail being offered for free to drive people away from Yahoo and Hotmail. Chances are once you're on Google services you're more likely to use Google Search (which is where the money lies). For example look at the nicely placed Search the Web box at the top of GMail.