5 ms·

Does it fail though? It's all about timelines, you might be able to get an advantage for a short while but not normally for long.

theptip 5y ago
Is the question is whether predatory pricing either works or harms consumers? I think it's quite widely understood by economists and legislators that it can work; the Wikipedia article up-thread gets fairly technical, e.g. https://en.wikipedia.org/wiki/Predatory_pricing#Long_term_cost-based_rule https://en.wikipedia.org/wiki/Predatory_pricing#Long_term_co.... You can absolutely loss-lead a competitor out of business if you have a bigger pile of cash, and then raise prices higher. Perhaps facetiously, I'd suggest the question can be more succinctly answered by saying if it didn't work, then large companies probably wouldn't do it. Or is the question about whether or not this is a failure of regulatory framework?
- dantheman 5y ago
  It's understood that it "can" work - but we don't see it actually working / harming in the medium/long term. It's the same way cornering the market "can" work, but doesn't really happen.
  - theptip 5y ago
    > we don't see it actually working / harming in the medium/long term I am not sure about that. There's a lot of consternation about this currently, many people think that there are serious long-term harms currently being inflicted. The fact that Biden picked a strident anti-trust advocate like Khan to head up the FTC suggests that there's political support for the case that there's active harm going on right now, as well. The article provides a few concrete examples, and while I think Amazon is sometimes unfairly treated in the press, this is a case that I find quite troubling: > In 2009, when Amazon noticed an e-commerce upstart called Quidsi making inroads with a subscription business aimed at parents, Diapers.com, Amazon made a bid to buy it — while launching its own subscription service, Amazon Mom, that offered even steeper discounts. Documents later revealed as part of an antitrust investigation reportedly showed Amazon was willing to lose $200 million in a month on diapers alone to neutralize the threat Quidsi posed. Quidsi gave in and sold to Amazon in 2010. And on the core point of the article, whether Facebook Bulletin is an example of predatory pricing -- I think that the FTC doesn't understand social networks, made a huge mistake allowing FB to buy Instagram, and the current regulatory framework doesn't work for social networks. Zuckerberg understands social networks. As he put it: "There are network effects around social products and a finite number of different social mechanics to invent. Once someone wins at a specific mechanic, it’s difficult for others to supplant them without doing something different. “One way of looking at this is that what we’re really buying is time. Even if some new competitors springs up, buying Instagram, Path, Foursquare, etc now will give us a year or more to integrate their dynamics before anyone can get close to their scale again. Within that time, if we incorporate the social mechanics they were using, those new products won’t get much traction since we’ll already have their mechanics deployed at scale.” Through this lens we can analyze Facebook's strategy. Zuckerberg (correctly, I believe) thinks that it needs to win in each of the finite number of "social mechanics" that will be invented in order to maintain dominance over these modes of sharing. If it can't buy competitors in these spaces, it will create clones and run them at a loss to prevent them from taking off. Hence "Bulletin"; copycats are in some sense inevitable, but if FB undercuts Substack on their platform fee and/or overbids for content creator contracts, then they could drive Substack's valuation down and ultimately acquire them, just like Amazon did to Quidsi.
ukoki 5y ago
It fails with complementary products, like when you give away a browser for free to boost your search engine business.

theptip 5y ago

Is the question is whether predatory pricing either works or harms consumers? I think it's quite widely understood by economists and legislators that it can work; the Wikipedia article up-thread gets fairly technical, e.g. https://en.wikipedia.org/wiki/Predatory_pricing#Long_term_cost-based_rule https://en.wikipedia.org/wiki/Predatory_pricing#Long_term_co.... You can absolutely loss-lead a competitor out of business if you have a bigger pile of cash, and then raise prices higher. Perhaps facetiously, I'd suggest the question can be more succinctly answered by saying if it didn't work, then large companies probably wouldn't do it. Or is the question about whether or not this is a failure of regulatory framework?

dantheman 5y ago
It's understood that it "can" work - but we don't see it actually working / harming in the medium/long term. It's the same way cornering the market "can" work, but doesn't really happen.
- theptip 5y ago
  > we don't see it actually working / harming in the medium/long term I am not sure about that. There's a lot of consternation about this currently, many people think that there are serious long-term harms currently being inflicted. The fact that Biden picked a strident anti-trust advocate like Khan to head up the FTC suggests that there's political support for the case that there's active harm going on right now, as well. The article provides a few concrete examples, and while I think Amazon is sometimes unfairly treated in the press, this is a case that I find quite troubling: > In 2009, when Amazon noticed an e-commerce upstart called Quidsi making inroads with a subscription business aimed at parents, Diapers.com, Amazon made a bid to buy it — while launching its own subscription service, Amazon Mom, that offered even steeper discounts. Documents later revealed as part of an antitrust investigation reportedly showed Amazon was willing to lose $200 million in a month on diapers alone to neutralize the threat Quidsi posed. Quidsi gave in and sold to Amazon in 2010. And on the core point of the article, whether Facebook Bulletin is an example of predatory pricing -- I think that the FTC doesn't understand social networks, made a huge mistake allowing FB to buy Instagram, and the current regulatory framework doesn't work for social networks. Zuckerberg understands social networks. As he put it: "There are network effects around social products and a finite number of different social mechanics to invent. Once someone wins at a specific mechanic, it’s difficult for others to supplant them without doing something different. “One way of looking at this is that what we’re really buying is time. Even if some new competitors springs up, buying Instagram, Path, Foursquare, etc now will give us a year or more to integrate their dynamics before anyone can get close to their scale again. Within that time, if we incorporate the social mechanics they were using, those new products won’t get much traction since we’ll already have their mechanics deployed at scale.” Through this lens we can analyze Facebook's strategy. Zuckerberg (correctly, I believe) thinks that it needs to win in each of the finite number of "social mechanics" that will be invented in order to maintain dominance over these modes of sharing. If it can't buy competitors in these spaces, it will create clones and run them at a loss to prevent them from taking off. Hence "Bulletin"; copycats are in some sense inevitable, but if FB undercuts Substack on their platform fee and/or overbids for content creator contracts, then they could drive Substack's valuation down and ultimately acquire them, just like Amazon did to Quidsi.

ukoki 5y ago

It fails with complementary products, like when you give away a browser for free to boost your search engine business.