> Once your competitors go out of business you're the only guy left in town so you raise your prices to the moon and profit.
Has there ever been a case of this happening?
Has there ever been a case of this happening?
Mega Cable Co. proceeded to drop prices to the floor only in the postal codes covered by the indie ISP and drove them out of business. Now it's business as usual for Mega Cable Co.
After all profitable only comes after fixed costs are covered. If sales drop below the amount required to cover those fixed costs the business is no longer viable....
But as a counterpoint:
> In the cigarette racket, for example, predatory price-cutting was common around the turn of the century, when the Tobacco Trust, composed of the American Tobacco Company and several allied firms, cornered 95 percent of the market, typically by selling its products at a loss in a given area until local competitors went bankrupt or sold out. In 1911 the Supreme Court ordered the trust broken up into 16 successor companies (many of which are still around today). Since then the companies have mostly been content to compete on the basis of largely imaginary differences in quality, which they promote through extensive advertising. National ad campaigns are quite expensive, of course, which discourages new firms from entering the market, and as a result the existing manufacturers have the field pretty much to themselves [in 1981].
> This all sounds pretty snaky, I suppose, but it's worth pointing out that oligopolies can't just set any old price they want to. In 1931, for instance, all the major tobacco companies followed Reynolds's lead in raising cigarette prices, despite the fact that the price of tobacco leaf had fallen to a 25-year low. This stupid move permitted several small manufacturers to introduce 10-cent brands to compete with existing brands, which were going for 13 cents a pack. By 1932, the 10-cent brands accounted for 23 percent of the market, setting off a price war in which wholesale prices were slashed 20 percent. Despite this, several relatively small companies, such as Philip Morris, were able to gain a foothold in the market and eventually overtook some of their previously impregnable competitors.
http://www.straightdope.com/columns/read/179/why-do-all-bran...
> you're the only guy left in town so you raise your prices to the moon and profit.
Sure, it's not because of dumping. But you can do that with an effective monopoly (pseudo or not).