[ericd]

The quote from 2 bros "We have enough power to wait them out. They’re not going to make a fool of us." when they have 11 other stores charging a higher rate to make up for the loss of this one that's fighting with another store makes this seem like textbook predatory pricing, which is illegal, for very good reasons.

[jim_h]

"But 2 Bros. has a security camera. Winding back to the night in question, the night of the sudden 21-cent price drop, a manager found frames that showed the front of the two stores. And there it was: Bombay/6 Ave. Pizza’s 79-cent sign when 2 Bros. was at $1. Mr. Patel and Mr. Kumar had made the first move."

Bombay Pizza made the first move to lower price.

[baddox]

I assume your "very good reason" is that the law will help an inferior business compete with a superior business.

[ericd]

No, it's because it's a common monopoly building tactic which is bad for the economy.

It's because a larger and/or diversified business can mercilessly destroy all competition in a market by selling under cost and offsetting their losses with price hikes in areas where they face no competition until the competition in the new area gets wiped out from having to sell at or below cost. Once the new area is secure, the predatory company can then charge monopoly prices in that area as well and move on to sweeping a new area. Historically this was a common business tactic and was used to create some fairly large monopolies before it was outlawed.

[rbarooah]

The basic idea of these laws, is to help a superior but less well financed business to compete with an inferior business with larger coffers.

You may be right that this is flawed, but I don't think you can dismiss it without a little more reasoning.

[baddox]

I guess the difference is in how you judge which of two companies is superior. I tend to think that the one that gets more/better business (from selling more, making higher margins, etc.) from voluntary customers is superior.

[electromagnetic]

The whole point is that these places aren't making margins off of this, they're losing out.

You're not a better business when you purposefully place yourself next door to an existing store and use corporate weight to temporarily price your product lower than your competition can sustain before you jack it up. Noted by the "We have enough power to wait them out." comment from the Two Bros guy.

The better business here is the Joey Pepperoni's whose owner refused to drop his price below his profit margin, but his business is likely relying more on long-term customers than it should have to because two business owners are being stupid, and one is being predatory.

The point here is that Walmart opening next door to your current grocery store, and pricing everything at a loss for 12 months to run the incumbent out of business and then price hiking everything over what the incumbent used to charge, doesn't make them the better business. It means they're the worse business because they're bad for the economy, bad for the community and bad for future business. Why? Because no store could open and survive next to a walmart if they were allowed to predatory price.

[rbarooah]

Certainly, if you define 'superior' as whoever gets the most sales regardless of the utility produced, then there is nothing to debate.

The argument against this is that certain tactics (such as predatory pricing) for achieving this are designed to produce a monopoly, and a monopoly results in higher prices and lower utility than a competitive market.

[ericd]

The quality of the two companies is irrelevant - the point is to avoid having well funded companies invade and monopolize markets, and then using their monopoly to hike prices above where they were before they arrived and milk the area.

[ajb]

Fortunately, the law against predatory pricing doesn't need to judge which is superior.