Gorging¶
When I tried to search for the demand version of dumping, I found a lot of articles about regular dumping. A few of those had good definitions, so here’s one:
Loosely speaking, the term “dumping” denotes a situation when a firm charges a lower price in a foreign market than it charges for the same good in its domestic market or when it exports the good at a price below costs. [1]
It seems to me that this definition of dumping makes it an trade thing, not a thing that happens within a country when corporations are competing for a market.
What I could not find was a term for attempting to import goods at prices well above the market price. You might wonder why one would want to do that, and for that I need to shift into another meaning for dumping.
The definition of dumping above is about international trade, but it seems clear to me that there’s a closely analogous behavior that companies engage in, where they sell their goods (or services) below their costs in order to drive competition out of business. Then they rely on barriers to entry to prevent new competitors from sprouting up when they raise their prices in the newly-monopolized market.
So now my argument is that if we can apply the term “dumping” to people who monopolize markets by selling at a loss, we need a term for people who monopsonize markets by buying at a loss.
This video by Hank Green started me thinking along these lines. It seems to me that what Hank’s describing in his video is a company paying more than the direct value of a video for videos that can’t be put on its competitor’s platform. That feels like a thing that should have a term, and I think that term should be gorging.
So, according to me, gorging denotes a situation when a firm pays a higher price in a foreign market than it offers for the same good in its domestic market, or when it imports the good at a price above the value it gets from it. Or, in a less import/export sense, when a company pays a higher price for goods or services in order to starve its competitors of supply.
Other monopsonies have engaged in this kind of behavior, and without a term for it I don’t see how it can be effectively discussed or regulated.
Of course, I’m not an economist and this seems like the kind of thing people would already have words for. I did a quick check with an economist, and a little bit of searching around, but that doesn’t mean I didn’t miss something. If there’s already a better and widely used term for this kind of behavior, I’d be happy to know about it.
Footnotes