Subject: Re: Free Software == Dumping??
From: (L. Peter Deutsch)
Date: Tue, 27 Jun 95 14:30 PDT

> But consider: the big company is losing money at ten times the rate of
> a smaller company.

Yes, but capital reserves, and access to capital, tend to be non-linearly
better for larger companies.

> And if the dumping succeeds, the prices will be
> higher, so there's great incentive for the smaller companies to stay
> in business. So the smaller companies might very reasonably borrow
> money, and reduce their prices to match.

Smaller companies don't have access to capital on the same terms as big
companies, and the owners have a lot more to lose.  Have you ever asked
anyone who was running a small company in a situation like this about how
feasible it was to respond by borrowing?

> And don't forget that, with the lower prices, the big company is going
> to attract more business.  What they lose on each item, they'll make
> up in quantity.  :)

On the contrary, a "loss leader" is a good tactic for attracting customers
for other, profitable items.  The big company may actually make *more* money
overall by selling some of its products below cost.

> And in the meantime, wealth has been transferred from the big company
> to society in general.

See the previous paragraph.  Also, big companies aren't fools.  They'll only
sell below cost if they have a reasonable expectation that the return in
terms of attracting customers, establishing market leadership (allowing them
to raise prices), or putting small companies out of business (allowing the
big company to maintain higher prices) will be positive for them.

> I just don't see why society prohibits
> dumping.  I can see why companies that are the targets of dumping
> wouldn't like it, but we don't (or rather, shouldn't) run society for
> the benefit of one or two companies.

In my opinion, the idea that Western economies are a "level playing field"
for large and small companies, absent legislation of this kind, is a
dangerous myth.  I consider leveling the playing field to be one of the
legitimate economic roles for government, and I consider anti-dumping laws a
reasonable activity in this role.

L. Peter Deutsch :: Aladdin Enterprises :: P.O. box 60264, Palo Alto, CA 94306; voice +1-415-322-0103 (8:30 AM - noon); fax +1-415-322-1734
             "Implementation is the sincerest form of flattery."