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It does if McDonalds decides that it wishes to dump burgers. The ask price would fall to $0. The market will correct very quickly, as competitors will immediat
by ISL 6y ago
It does if McDonalds decides that it wishes to dump burgers. The ask price would fall to $0.
The market will correct very quickly, as competitors will immediately head over to McDonalds to purchase $\infty$ burgers at $0, killing MCD dead in seconds.
The moment McDonalds applies a purchase limit (Free burgers! Limit 5 per customer), the burgers have non-zero cost, as they require a person's time in order to purchase.
If McDonalds does have enough capital to buy long-term customers and kill off competition with free burgers, perhaps they should consider it. I assume that they've considered such a strategy on occasion and concluded that it isn't worth it. Burgers are probably worth more than $0 to McDonalds, too.
- jefftk 6y ago> If McDonalds does have enough capital to buy long-term customers and kill off competition with free burgers, perhaps they should consider it. I'm pretty sure they should not consider it, because it is generally illegal. https://en.wikipedia.org/wiki/Predatory_pricing https://en.wikipedia.org/wiki/Predatory_pricing
- stale2002 6y ago> I'm pretty sure they should not consider it, because it is generally illegal. It is really not. At least in America. In America, where laws are based on consumer benefit, it is extremely difficult to prosecute companies for having too awesome of a service, that they give away for too good of a price, in a way that helps consumers too much. It really just isn't something that gets prosecuted, except in absolutely exceptional circumstances.
- ghaff 6y agoLeaving aside any skirting of regulations also involved, is the government going to prosecute Uber or Lyft because they're losing boatloads of money and therefore obviously priced too low?
- stale2002 6y agoThis is a great example, actually. Because Uber is no stranger to being prosecuted by the government. That happened a bunch of times, when they were operating as a taxi company, without following taxi laws (before they got those laws changed, of course, lol). But of all the things that Uber has gotten in trouble with, do you know what they have not been prosecuted for? They have not been prosecuted for selling taxi services for too low of a price to consumers. Breaking taxi laws = yep prosecuted But price dumping = nope, not in trouble for that.
- snowwrestler 6y agoKeeping in mind where this thread started... I'm not aware of a similar law that prohibits employers from overpaying their employees, though.
- ghaff 6y agoMcDonald's (among many other places--especially those with many lower income customers) certainly do have loss leaders. I don't eat at McDonald's but I assume something like the $1 $2 $3 menu functions as something to get people in the door after which they or their friends may buy high-priced/margin items as well.
- deleted 6y ago[deleted]