IIRC, Best Buy sold CDs below cost, in hopes that people buying them would stick around and have a look at a new appliance etc. In the mid-90s they had a surprisingly good CD selection.
I think Ikea still does this with (some of) the food in their restaurants (e.g. 50 cent hot dogs).
I worked for a company that developed, delivered, and supported a CMS for free where the end user (not the actual customer) was a government agency, so they could use that as a reference in hopes of attracting customers who actually paid. They did another contract with the Navy below-cost, for the same reason. Then they had contracts in places where bribes are not only allowed, but expected, and some of those were already below-cost to begin with (to get their foot in the door so they could… pay more bribes, I guess). Eventually the company imploded.
I don’t know if he was (exactly) right, but a friend once told me that if a company loses money long enough, the IRS will no longer treat it as a company, but as the owner’s hobby. This would mean that gross income = net income for tax purposes. He told me this in the context of why The Caravan of Dreams went from booking the likes of Ornette Coleman and William S. Burroughs to becoming a smooth jazz, and then comedy, venue.
Not exactly, it turns out. Predatory pricing is illegal, just impossible to prove. Many of the examples of why it doesn’t work deal with goods not services.
Can prices ever be “too low?” The short answer is yes, but not very often. Generally, low prices benefit consumers. Consumers are harmed only if below-cost pricing allows a dominant competitor to knock its rivals out of the market and then raise prices to above-market levels for a substantial time. A firm’s independent decision to reduce prices to a level below its own costs does not necessarily injure competition, and, in fact, may simply reflect particularly vigorous competition. Instances of a large firm using low prices to drive smaller competitors out of the market in hopes of raising prices after they leave are rare. This strategy can only be successful if the short-run losses from pricing below cost will be made up for by much higher prices over a longer period of time after competitors leave the market. Although the FTC examines claims of predatory pricing carefully, courts, including the Supreme Court, have been skeptical of such claims.
Yes but this is speaking specifically to monopolistic activities that are covered (ish) by anti-trust law.
Companies off all stripes give away stuff, all the time. Cellphones, for example. If carriers weren’t able to give them away for free, widespread adoption would’ve taken a looooot longer, maybe setting tech progress back in general. The Nokia was like $200 or more w/o a contract, nobody had time for that nonsense when they never needed one before. Free though, with a monthly service that’s obviously superior to having a home phone?
I’m aware that we still paid for the service, but economically speaking they are separate things with their own inherent value. And that service itself was highly subsidized via numerous tools, so the price you paid was not tied to reality, anyway. Free phones! Pretty Big Deal.
I think “leasing vs buying” is a different conflict than predatory pricing and doesn’t compare well. The fact that people think it’s free not a lease type payment is their own stupidity. I have a friend with an old iPhone that is still paying $100/month for his service, literally years after he paid it off. He has paid several thousand dollars for that phone.
What I’m saying is the cost of the phones is built into the plans, which amounts to a lease, amortizing out the cost over the life of the contract. No free lunch or phones.
Except it was not. Free phones were not covered in subscriber contracts, and often the consumer recouped their cost after the point of sale via debate. Often the issuance of rebates or putting phones on sale for a buck or whatever was at the dealers discretion. A wireless store on some upscale avenue was not obliged to give away free shit, but it made sense at my lonely island in a wholesale megamart
You’re talking about bottom shelf, not top shelf. Maybe a $10-20 phone can be truly given away, I had a $10 phone at one point. But people also get “free iPhones” with expensive contracts. No one gives away $700 phones.
So does anyone know what Uber spends all its money on?
Ones I can think of: compensation / benefits, office real estate, IT costs, driver signup incentives, insurance policy. I wouldn’t think it would add up to so many billions. Is there something I’m missing?
Heh, there should be a name like “unicorn,” but for startups that get to $1B in legal fees.
Perhaps they really are doomed. Few companies have deserved it as much. I guess one important angle is, is there really some basis to suspect Uber has delayed any IPO out of concern for its financials? If so, then the recent publicity failures around the company’s horrible behavior have, perversely, only enabled it to continue putting off the end. I didn’t read all 5 or so of Horan’s articles, and maybe there’s some additional detail in there somewhere.
