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It is, of course, rather difficult to cap the profit margin of a company in the real world, both for political reasons and due to the difficulty of actually def
by makomk 10y ago
It is, of course, rather difficult to cap the profit margin of a company in the real world, both for political reasons and due to the difficulty of actually defining profit.
- oli5679 10y agoYou can just use the gross margin accounting definition, this isn't too difficult and firms should be roughly compliant. Also, firm profits should be higher than if you ban price-discrimination, so I don't see where the political resistance would come from? There are issues with: 1) Estimating the demand system and so picking the optimal gross margin. However, banning price discrimination is also relatively blunt and leads to a somewhat arbitrary outcomes from a welfare perspective. 2) Effects on firm incentives to reduce costs. If a firm knows that it will be subject to maximum gross margin restrictions in the future, it will have a weaker incentive to innovate possibly?