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Home Price and Output Determination Under Monopoly Dumping




Definition and Explanation:


Dumping is a special case of price discrimination. Dumping is a situation in which the price, a firm charges for its goods in a foreign market is lower than either the price it charges in its home market or the production cost. Dumping thus is the sale of surplus output of a firm on foreign markets at below cost price. Dumping also occurs when a firm sells its products at a higher price in the home market and at a lower price in the foreign market.




A firm may resort to dumping for a number of reasons which in brief are as under:     


(1) Price discrimination: The first reason of dumping is price discrimination. If a firm has monopoly of a good in home market, but faces strong competition in foreign market, the firm will naturally charge a higher price in home market and lower competitive price in foreign market.


(2) Predatory pricing: The second major reason is predatory pricing. It is the practice of cutting prices of goods in an attempt to derive rival firms out of business.            


(3) Surplus stock: A firm may resort to dumping to dispose off surplus stock.


(4) Economies of large scale production: The big firms where huge fixed capital is required for producing the goods may resort to dumping to avail of the economies of large scale production.


Dumping is illegal under international trade agreements of World Trade Organization (WTO). A nation can impose anti dumping duties only on production that are being dumped.  


Relevant Articles:


What is Monopoly
Conditions/Base of Monopoly Power
Monopolist's Demand Curve
Short Run Equilibrium Price and Output Under Monopoly
Long Run Equilibrium Under Monopoly
Comparison Between Monopoly and Competitive Equilibrium or Perfect Competition
Misconceptions Concerning Monopoly Pricing
Monopoly Regulations
Monopoly Price Discrimination
Price and Output Determination Under Discrimination Monopoly
Assessment of Discriminating Monopoly or Price Discrimination

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money

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