UGM June 2019 Q46
- Option : B
- Explanation : Types of Dumpings: Different types of dumping are being practised by firms—sporadic, predatory, persistent, and reverse.
Sporadic Dumping: This type of dumping occurs when a manufacturer with unsold inventories desires to get rid of distressed and excess merchandise. Goods are sold at any price that can be realised. The excess supply is dumped abroad in a market where the product is normally not sold.
Predatory Dumping: This involves selling at a loss to gain access to a market and perhaps to drive out competition. Once the competition is destroyed or the market is established, the firm uses its monopoly position to increase price.
Persistent Dumping: This involves selling at a lower price in one market than in others. Japan is able to keep prices high at home, especially for consumer electronics, because it has no foreign competition there. But it is more than willing to lower prices in the US market in order to gain or maintain market share. Japanese consumers, as a result, must sacrifice by paying higher prices for Japanese products that are priced much lower in other markets.
Reverse Dumping: The three kinds of dumping discussed above have one characteristic in common: each involves charging lower prices abroad than at home. It is also possible to have the opposite tactic—reverse dumping. In order for this to happen, the overseas demand must be less elastic, and the market will tolerate a higher price. Any dumping will thus be done in the manufacturer’s home market by selling locally at a lower price.
