Dumping (pricing policy)

Dumping ( English to dump, dump '), [ ... as ] the ,-s (plural ) refers to the sale of goods or services under the production cost or their own costs. If the sale is outside the Herstelllandes, the term refers to the terms ruling in the home market of the exporter prices. Such dumping is useful from the viewpoint of the producer, if a re-import of goods into the country of origin is not possible.

The price of dumping provider is also known as dumping or penetration price.

Motivation

A dumping provider always takes the short term economic loss in purchase to achieve long-term positive knock-on effects for himself. There can be different objectives to offer an asset at a dumping price:

• Reduce market shares of the competitors.
• Competition completely out of the market to achieve a monopoly.
• To reach the market entry.
• The business deals with a specific customer, particularly in the service sector.

From state- dumping occurs when this is made possible by a government export promotion, with economic policy objectives are based. The monetary policy of a state can seek to promote exports and slowing imports ( see also " Competitive devaluation "). States that have not freely convertible currency can simply set the rate of their currency.

Who wants to rent an asset (eg hotel rooms, merchant ship, railroad car ), so to speak, has a perishable commodity '. For example, if a hotel room threatens to remain untenanted, the landlord tempted to rent it to a below-cost price. His motivation is "better a non- cost-covering rent price than no income ." Possible lower limit of a rational rent is its variable costs ( eg hotel room: cost of Roomkeeping, final cleaning, water, electricity, possibly breakfast); see also contribution margin. This temptation can lead to a price war in a market or to ruinous competition.

Effect

Dumping in any case leads to a short-term subsidy of dumped goods or services and thus of that of favoring the buyers circle at the expense of who performs the dumping. Whether the intended medium-or long -term implementation of the interests of the dumping provider is successful depends on many factors, including the market performance, flexibility of the market and the behavior of customers. The more developed and more flexible a market is organized and the greater are the chances for the entry of new, non- monopolistic provider, the lower the chance that dumping the long run can unfold the intended harmful for the market effect.

Countermeasures

Except for agricultural dumping, dumping is prohibited under the rules of the WTO. Since the actual cost structures of a provider for an outside authority are not accessible, practical reasons (for example, in the legal opinion of the WTO ) Dumping already assumed if the observed price of the exported goods in the exporting country is lower than the price in the country of production. A detectable damaged by dumping country is entitled to levy anti-dumping duties.

Derived term use

In a figurative sense is widely spoken also of social dumping, if lower social standards make it possible to offer goods and services cost-effectively in a third country. This, however, differs from the above definition of dumping and is therefore a transfer of negative value Occupied term in a different context.

The same applies to tax dumping. This is where individual areas of an economic area their tax rates for businesses or individuals at very low or dispense (temporarily ) all the way on taxing to gain a competitive advantage.

Genuine social dumping occurs when social standards are left partially ignored, such as in the case of undeclared work outside working hours by socially insured full-time employees. The favorable final price can be offered only because the supplier does not put aside the cost of social security on undeclared work.

Often the dumping accusation is also charged improperly to justify trade measures or foreign providers to force them to voluntary self-restraint, such as the Byrd Amendment.

Also dumping is often assumed, even when lower prices are quite reasonable due to comparative advantage.

Also in the figurative sense one speaks of wage dumping, if low wages are paid, especially when they are below the minimum cost of living or welfare benefits.

History

The economist Gottfried Haberler dealt extensively with dumping.