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Inside Dumping Theory: Austrian Perspectives On The Cost Problem

Author

Listed:
  • Andreas STAMATE-ȘTEFAN

    (Bucharest University of Economic Studies)

  • Iacob MIHAELA

    (Bucharest University of Economic Studies)

  • Tudor SMIRNA

    (Bucharest University of Economic Studies)

Abstract

Predatory price strategy leads - according to neoclassical cost theory- to resource misallocation and eventually strengthens the market position of the predator until he becomes a monopolist. When the monopoly position is achieved, it is said that output is restricted and prices increase; government intervention is supposedly needed to prevent the so called negative effects of predatory pricing. Neoclassical assumptions in competition theory also serve as basic principles for the legal standards. In the present work, we assume an alternative cost theory, consistent with the Austrian approach in economics. The substance of this theory is that selling below costs can be a perfectly normal business practice and also beneficial for consumers, while outlawing it can determine a negative change in entrepreneurs’ incentives structure and induce a disruption between them and consumers.

Suggested Citation

  • Andreas STAMATE-ȘTEFAN & Iacob MIHAELA & Tudor SMIRNA, 2017. "Inside Dumping Theory: Austrian Perspectives On The Cost Problem," Review of Social and Economic Issues, Romanian-American University, vol. 1(4), pages 44-62, march.
    • Handle: RePEc:rau:rseijr:v:1:y:2017:i:4:p:44-62
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    References listed on IDEAS

    as
    1. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
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    3. Andreas Stamate, 2011. "An Economic Interpretation Of Neoclassical Monopoly Theory In The Light Of Austrian School," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(13), pages 1-36.
    4. Smirna Tudor, 2010. "Există ştiinţă dincolo de măsurare? (Perspectiva austriacă asupra utilizării matematicii în economie)," Revista OEconomica, Romanian Society for Economic Science, Revista OEconomica, issue 03, September.
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