Quote:
Originally Posted by Fbone
In my state it's not legal. Perhaps, I am confusing manufacturing costs with wholesale. I thought it was referred to as "dumping."
One example was a gas station as a promotion sold regular gas a few cents under wholesale expecting to make it up with premium gas and convenience store items. The state authorities came and forced him to raise his price.
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Some governments feel the need to regulate the pricing of "essential" products. It is not universal even in those states.
"Dumping" is the sale of products below manufacturing costs across national boundaries. It is only deemed illegal if it harms local producers.
Otherwise, selling below cost happens all the time and is called "clearance", "fire" sales, or just plain "doorbusters". Check the thread on Sony reader pricing at Target for a perfect example.
A better example of what Amazon does can be found in supermarket weekly fliers: they are loaded with loss-leader sale items intended to draw in traffic and customers that will then buy other, regular-priced, items. It is called "basket pricing" because, while the supermarket may lose money on the sale of the discounted items, they make it back on the rest of the purchases in the shopping basket. Perfectly legal and standard practice in volume-based retailing.
Proponents/apologists for agency pricing just like to pretend that books are a special product, immune from normal laws of economics like price elasticity or even from competition. Never mind that the Price-Fix Five only control a minority fraction if the total ebook market. Time will tell just how wrong they are, but for now their small- and mid-size competitors (and Random House) are thrilled at the nice pricing umbrella the scheme is providing them and the market share the Price Fixers are donating to them.