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>Given that consoles are often sold at a loss with profits recouped on game sales I've wondered about this before: how is this not anti-conpetitive pricing? Is

>Given that consoles are often sold at a loss with profits recouped on game sales I've wondered about this before: how is this not anti-conpetitive pricing? Is it okay because Sony/MS don't raise prices?

dmoy 3y ago
US law in that area looks more at consumer harm, not incidental harm to other companies, IIRC. There's a separate way to get in trouble here around predatory pricing, but I think that's more complicated (you have to be doing it specifically to drive people out of business). It depends on what the rest of the market does. See https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost-pricing https://www.ftc.gov/advice-guidance/competition-guidance/gui... Specifically > Pricing below a competitor's costs occurs in many competitive markets and generally does not violate the antitrust laws. Sometimes the low-pricing firm is simply more efficient. Pricing below your own costs is also not a violation of the law unless it is part of a strategy to eliminate competitors, and when that strategy has a dangerous probability of creating a monopoly for the discounting firm so that it can raise prices far into the future and recoup its losses. So > Is it okay because Sony/MS don't raise prices? Yes exactly this. See also: Printers sold below cost with expensive ink refills. E-readers, often Razors for shaving - the base or chassis or whatever you call it is often sold below cost.
- Aerroon 3y ago
  Thank you!
  - dmoy 3y ago
    No problem, it's a good question, and it only works that way because of the particulars of US law. It differs for other countries, or even within the same country over time (the US's consumer focus was less strong in earlier years).
criddell 3y ago
The consoles-are-sold-at-a-loss explanation has always seemed like an extraordinarily week argument for giving Microsoft and Sony a pass on bad behavior. Their consoles may be sold at a loss at launch, but I don't know of any console hardware that wasn't net profitable over it's lifetime with the possible exception of the XBox with the ring-of-death problem.

dmoy 3y ago

US law in that area looks more at consumer harm, not incidental harm to other companies, IIRC. There's a separate way to get in trouble here around predatory pricing, but I think that's more complicated (you have to be doing it specifically to drive people out of business). It depends on what the rest of the market does. See https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost-pricing https://www.ftc.gov/advice-guidance/competition-guidance/gui... Specifically > Pricing below a competitor's costs occurs in many competitive markets and generally does not violate the antitrust laws. Sometimes the low-pricing firm is simply more efficient. Pricing below your own costs is also not a violation of the law unless it is part of a strategy to eliminate competitors, and when that strategy has a dangerous probability of creating a monopoly for the discounting firm so that it can raise prices far into the future and recoup its losses. So > Is it okay because Sony/MS don't raise prices? Yes exactly this. See also: Printers sold below cost with expensive ink refills. E-readers, often Razors for shaving - the base or chassis or whatever you call it is often sold below cost.

Aerroon 3y ago
Thank you!
- dmoy 3y ago
  No problem, it's a good question, and it only works that way because of the particulars of US law. It differs for other countries, or even within the same country over time (the US's consumer focus was less strong in earlier years).

criddell 3y ago

The consoles-are-sold-at-a-loss explanation has always seemed like an extraordinarily week argument for giving Microsoft and Sony a pass on bad behavior. Their consoles may be sold at a loss at launch, but I don't know of any console hardware that wasn't net profitable over it's lifetime with the possible exception of the XBox with the ring-of-death problem.