[dpark]

You cannot “compete” by selling at a loss, unless you’re competing for the first spot at bankruptcy court.

Whenever I hear about someone selling at a loss, I automatically assume that either they’re buying market share as a long bet (e.g. typical new gaming console) or more commonly misrepresenting the actual economics (e.g. car dealers neglecting to mention all the rebates they get off their supposed price).

[kd5bjo]

The other common case (not applicable here) is a loss leader: sell something at a loss in the hope that the customers it attracts will buy high-margin items at your store instead of the one they usually frequent.

[unreal37]

There are going to be times (a few days or weeks) where sellers think they can "outlast" the competition in a price war.

You're basically betting that the other guy doesn't have the stamina to survive at this price.

Of course, if what the OP says is true, if the other seller has a much lower price point than you do, you can't outlast them. They could still be making a profit at $20 while you're losing $5 per unit trying to push them out.

[prklmn]

Think about inventory holding costs. Not only do you have capital tied up in that product in the warehouse, but you also have the opportunity cost of not being able to stock something else to sell.

And to your car dealership point - the way it works for GM at least is that GM sets sales goals for their dealers. Dealer X's monthly sales target is 75 vehicles. They will happily sell lets say vehicles 73, 74, and 75 on August 31st to get their $20k bonus for the month of August. They might not be misrepresenting their supposed price like you think. Also, the same concept of inventory holding costs applies really well for car dealers. It's purely an inventory turnover business. If your lot is full of fusions and you can sell 2 f150s in the time that you can sell 1 fusion at similar profit, you're going to want to get those fusions off the lot potentially at a loss so you can sell more f150s.