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Anti-Economic Analysis Of Wal-Mart's Low Prices

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Wal-Mart’s Low Prices
“Wal-Mart is the largest private employer in the nation and the world’s largest retailer. With 1.6 million workers, 1.3 million in the United States and 300,000 offshore” (Miller, 2006). Thousands of Wal-Mart stores across the United States of America are best known for their slogan of save money live better. Wal-Mart retailers are regarded by the American public for the place to go to find everything from fishing gear to groceries at the lowest prices. However, to obtain these low prices, Wal-Mart must cut expenses, which it does across the board, including the pay and benefits to its workers in the United States. Wal-Mart 's low prices have often saved consumers money at the counter when they purchase goods, as
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Wal-Mart clearly is able to outdo small retailers, such as local stores, by sheer size in quantity. Since Wal-Mart uses its low prices to decrease its competition, it continues to sell its product less than other retailers, which inevitably leads them to close their business. This type of pricing that is used to intentionally reduce competition “antitrust economists refer to the anti-competitive practice of which Wal-Mart is accused as predatory pricing”(Dukes, 2003). To be accused of predatory pricing the business must be selling the products in question below the price of the good paid for by the business. However, Wal- Mart is able to sell its goods at a low rate through a “ highly efficient distribution system and retailing expertise give Wal-Mart a cost advantage that enables it to price its products below the competition and still make a profit”(Dukes, 2003). Since Wal- Mart is not blatantly engaging in predatory pricing and is still making a profit, Wal -Mart is considered to be engaged in normal market competition. Wal -Mart still needs to make a profit on the goods it sells at extremely low prices so it must obtain its goods at a lower cost. Wal-Mart is a mega retailer and with its buying power is able to have an influence that relatively smaller stores may not have. According to the Mexico’s Federal Competition Commission, Wal-Mart is able to use its power of large…show more content…
While Wal-Mart continues to dominate the market and provide low cost goods to consumers, it does so at a high cost. Wal-Mart 's millions of employees pay is not reflective with its subsequent profits, leaving families with financial instability. With Wal-Mart 's engagement in price discrimination and its power of the market to receive substandard low cost goods it continues to make enormous profits. The ability to obtain products at a low price not only has helped Wal-Mart keeps costs down but maintain them as an inferior good. Since Wal-Mart is inelastic, it has no incentive to raise its prices, or the price it is willing to pay to producers. Wal-Marts low price guarantee is really a guarantee of its economic stronghold over the
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