Open AccessPredatory pricing
Author(s) -
William A. Barnett,
Michael Saliba,
Walter E. Block
Publication year - 2007
Publication title -
corporate ownership and control
Language(s) - English
Resource type - Journals
eISSN - 1810-0368
pISSN - 1727-9232
DOI - 10.22495/cocv4i4c3p4
Subject(s) - discounting , economics , predatory pricing , microeconomics , marginal cost , revenue , rational pricing , value (mathematics) , opportunity cost , average cost pricing , set (abstract data type) , time value of money , implicit cost , financial economics , total cost , finance , capital asset pricing model , computer science , machine learning , programming language , monopoly
Predatory pricing is logically impossible, because it necessarily involves pricing below cost. However, cost, properly understood as opportunity cost is subjective and is incommensurable with money prices; more important, to price below cost implies rationally choosing an alternative (selling at price) that is suboptimal, since cost is the most highly valued alternative not chosen. When critics declare that predatory pricing is to price below cost, they mean to set a price below some measure of money expenses. But this entails all kinds of problems; which concept of expense – marginal is most obvious; but also the issue of the present value of alternatives, which means discounting expected revenues and expected expenses.