Many shops selling similar objects simultaneously give discounts in New Year’s sales. If each shop can make positive profits while giving such discounts, why cannot a firm undercut others in normal sales when nobody gives discounts times and get the entire market for a larger profit?

During times of perfect competition, the prices are set by the forces of demand and supply and remain so. The discounts given during offers are artificial ones intended to adjust the price reductions by bulk sales, and the volume in business tends to even out any minor price variations, thereby generating bulk profits.

However, under normal circumstances, it would not be possible to offer special discounts by any reputed seller unless he sells at a loss. Therefore, the question of granting discounts in the normal course of business cannot be sustained unless it is to wind up stock or close down the business.

In a hypothetical instance, when a seller disposes of his stocks at lower than normal prices, with the primary intention of undercutting other sellers, this would have disastrous effects on the market as a whole since other sellers would also have to sell at lower costs, to maintain sales volume. In the long run, the seller who undercuts regularly would lose his market reputation, and he would be forced to either increase his prices to bring it at par with other competitive products or leave the market.

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Academic.Tips. (2022) 'Many shops selling similar objects simultaneously give discounts in New Year's sales. If each shop can make positive profits while giving such discounts, why cannot a firm undercut others in normal sales when nobody gives discounts times and get the entire market for a larger profit'. 21 June.

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Academic.Tips. (2022, June 21). Many shops selling similar objects simultaneously give discounts in New Year's sales. If each shop can make positive profits while giving such discounts, why cannot a firm undercut others in normal sales when nobody gives discounts times and get the entire market for a larger profit? Retrieved from https://academic.tips/question/many-shops-selling-similar-objects-simultaneously-give-discounts-in-new-years-sales-if-each-shop-can-make-positive-profits-while-giving-such-discounts-why-cannot-a-firm-undercut-others-in-normal-s/

References

Academic.Tips. 2022. "Many shops selling similar objects simultaneously give discounts in New Year's sales. If each shop can make positive profits while giving such discounts, why cannot a firm undercut others in normal sales when nobody gives discounts times and get the entire market for a larger profit?" June 21, 2022. https://academic.tips/question/many-shops-selling-similar-objects-simultaneously-give-discounts-in-new-years-sales-if-each-shop-can-make-positive-profits-while-giving-such-discounts-why-cannot-a-firm-undercut-others-in-normal-s/.

1. Academic.Tips. "Many shops selling similar objects simultaneously give discounts in New Year's sales. If each shop can make positive profits while giving such discounts, why cannot a firm undercut others in normal sales when nobody gives discounts times and get the entire market for a larger profit?" June 21, 2022. https://academic.tips/question/many-shops-selling-similar-objects-simultaneously-give-discounts-in-new-years-sales-if-each-shop-can-make-positive-profits-while-giving-such-discounts-why-cannot-a-firm-undercut-others-in-normal-s/.


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Academic.Tips. "Many shops selling similar objects simultaneously give discounts in New Year's sales. If each shop can make positive profits while giving such discounts, why cannot a firm undercut others in normal sales when nobody gives discounts times and get the entire market for a larger profit?" June 21, 2022. https://academic.tips/question/many-shops-selling-similar-objects-simultaneously-give-discounts-in-new-years-sales-if-each-shop-can-make-positive-profits-while-giving-such-discounts-why-cannot-a-firm-undercut-others-in-normal-s/.

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"Many shops selling similar objects simultaneously give discounts in New Year's sales. If each shop can make positive profits while giving such discounts, why cannot a firm undercut others in normal sales when nobody gives discounts times and get the entire market for a larger profit?" Academic.Tips, 21 June 2022, academic.tips/question/many-shops-selling-similar-objects-simultaneously-give-discounts-in-new-years-sales-if-each-shop-can-make-positive-profits-while-giving-such-discounts-why-cannot-a-firm-undercut-others-in-normal-s/.

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