"THE FREE MARKET HAS FAILED"

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That's not at all the same thing as predatory pricing, where the firm intends to jack up prices later after the competition has been squashed.

Do you have any evidence to suggest that this a common practice? If I am understanding you correctly, you are worried that firms will sell stuff at a loss in the hopes that they will be able to jack up prices enough in the future to recover their previous losses, recover their forgone profits, and make enough extra to justify the risk involved. This is an incredibly stupid business model unless there are barriers to market entrance preventing other firms from entering the market after you jack up your prices.

It is exactly the same thing.

A supermarket can sell lager during the world cup at below cost knowing that they can make up the profit in barbecue meat and snacks. Even if they don't, they can absorb the cost.

A specialist shop has no choice, it makes a profit on it's specialist product or it goes bust. It can not sell for less than the purchase price like a behemoth supermarket can.

Today it is beer. Tomorrow it is books. Next month bras. The supermarkets systematically and ruthlessly cycle the loss leaders to destroy small start ups.

I suggest you read some history. In specific, look up 'Robber Barons,' 'Teddy Rosevelt,' and 'Anti-Trust Law Origins.'

Standard Oil Company - In 1909, the US Department of Justice sued Standard under federal anti-trust law, the Sherman Antitrust Act of 1890, for sustaining a monopoly and restraining interstate commerce. The government said that Standard raised prices to its monopolistic customers but lowered them to hurt competitors, often disguising its illegal actions by using bogus supposedly independent companies it controlled.
"The evidence is, in fact, absolutely conclusive that the Standard Oil Company charges altogether excessive prices where it meets no competition, and particularly where there is little likelihood of competitors entering the field, and that, on the other hand, where competition is active, it frequently cuts prices to a point which leaves even the Standard little or no profit, and which more often leaves no profit to the competitor, whose costs are ordinarily somewhat higher."[10]

France Telecom/Wanadoo—The European Court of Justice judged that Wanadoo (Now Orange Internet France) charged less than cost in order to gain a lead in the French broadband market. They have been ordered to pay a fine of €10.35m, although this can still be contested.[11]
Microsoft released their web-browser Internet Explorer for free. As a result the market leader and primary competitor, Netscape, was forced to release Netscape Navigator for free in order to stay in the market. Internet Explorer's free inclusion in Windows led to it quickly becoming the web browser used by most computer users.[12]
According to an AP article[13] a law in Minnesota forced Wal-Mart to increase its price for a one month supply of the prescription birth control pill Tri-Sprintec from $9.00 to $26.88.
According to a New York Times article[14] the German government ordered Wal-Mart to increase its prices.
According to an International Herald Tribune article,[15] the French government ordered amazon.com to stop offering free shipping to its customers, because it was in violation of French predatory pricing laws. After Amazon refused to obey the order, the government proceeded to fine them €1,000 per day. Amazon continued to pay the fines instead of ending its policy of offering free shipping.
Low oil prices during the 1990s, while being financially unsustainable, effectively stifled exploration to increase production, delayed innovation of alternative energy sources and eliminated competition from other more expensive yet productive sources of petroleum such as stripper wells.[citation needed]
In the Darlington Bus War, Stagecoach Group offered free bus rides in order to put the rival Darlington Corporation Transport out of business.

Actually, banks were forced to make the loans under the Community Reinvestment Act, specifically the changes made by Bill Clinton in 1995.

Anyways, the government forced banks to use ridiculously low standards when it came to giving someone a loan.

http://www.businessinsider.com/the-cra- ... ide-2009-6


Thing the article leaves out is Bush backtracked and tried to actually reign in Fannae May and Freddie Mac, as did the Republicans but were stopped by the Democrats.

I don't even think there is evidence to suggest that the loss leader strategy drives a significant amount of small businesses out of business. Any small business that tries to compete with a corporate giant solely on the basis of price deserves to go out of business (a large buyer will be able to negotiate better prices even if they are not selling stuff at a loss). Small businesses need to provide enough expertise and flexibility to be able to justify their higher prices. If they cannot do this, then they provide no benefit to consumers and by all rights should go out of business.

Clearly you're too young to remember the before time - the time before Walmart (and the other giants). Back when I was a kid, you got your school supplies from the local five and dime, you prescriptions at the local pharmacy, you ate at a local restaurant, you bought your tools at the local hardware store, you fixed your car at the local shop, and so on. These were all mom and pop shops. This was a setting much better suited fro free market enterprise.

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The reason why the "big box" stores succeeded as well as they have is that they provide goods at a much lower price than you precious "mom and pop" stores. What would you have us do? Go back to paying sky high prices to inefficient store operators?

ruveyn

These giant corporations are well-oiled machines that have enough power to effectively manipulate everything in their favor. This is a far cry from a simple, free-market system. Consumers have little in the way of choice or recourse today. Much of it is simply illusionary.

I will tell you something not illusory. I grew up in the "mom and pop" store era. The "mom and pop" stores were small, cramped, ill-lighted and smell musty. And the merchandise was not always of the highest quality. We have -competing- big box stores (even if they are chain stores). That competition keeps the prices down and the quality sufficiently good. You have romanticized "mom and pop" stores. I used to buy stuff from them.

Now is you want to keep jobs in the U.S.A. convince the proles to accept lower wages and the jobs will stay. But the law insists on regulating wages upwards, doesn't it. So the jobs go elsewhere.

ruveyn

A better solution would be for those 3rd world workers to unionize and demand *more* pay.

How do monopolies come to be? It is either through help from the government, or because they provide goods or services more efficiently than their competitors.

How do monopolies come to be? It is either through help from the government, or because they provide goods or services more efficiently than their competitors.

For many years the New York Central and the Pennsylvania Railroad had tracks that ran side by side in places. Likewise the New York Central and the Delaware-Lackawana-Hudson RR.

ruveyn

Any wage over the market prices for labor will distort the economy.

Wages should be determined by supply and demand, just like any other commodity.

ruveyn