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> One would assume I severely doubt it's the case. Besides, businesses aren't typically interested in having a competitive market anyways. It's probably more p

> One would assume I severely doubt it's the case. Besides, businesses aren't typically interested in having a competitive market anyways. It's probably more profitable to not lower prices at all and lobby to make it harder for competitors to lower prices . . . or just conspire with major competitors to keep them higher. Both actions have a strong historical precedent in US markets, at least.

ddxxdd 8y ago
Businesses are generally more competitive than people realize. The average person believes that corporate profits are typically in the 36% range, which is 5X higher than what reality shows: http://www.aei.org/publication/the-public-thinks-the-average-company-makes-a-36-profit-margin-which-is-about-5x-too-high-part-ii/ http://www.aei.org/publication/the-public-thinks-the-average...
- xyzzy123 8y ago
  Partly this is because profits are taxed, so it makes sense to shift profit into some other accounting bucket like capital expenditure / growth, offshore ip etc.
mruts 8y ago
There is a much much stronger historical precedent of businesses competing rather than colluding. Price fixing isn’t a Nash Equilibrium, and therefore, isn’t a stable state. The market will ruthlessly push prices on goods to their lowest profitable price by means of the marginal consumer. While price fixing obviously happens, it usually only happens in markets with a small number of producers. And even then, it will inevitably collapse. Look around, goods are very competitive nowadays. Computers are competitively priced, all goods on Amazon, nyc $1 pizza, food, gasoline, cars, clothes, etc. Very few businesses have the fat margins you claim are the norm. And the businesses that do are usually not producing goods, but renting services: telecoms, advertising, etc.
bookofjoe 8y ago
Concur. I've always been puzzled why self-checkout isn't, say 1% cheaper, considering how much labor costs in supermarkets and razor-thin profit margins.
- wutbrodo 8y ago
  This seems clear to me: customers aren't remotely rational, and will generally complain about economically fair systems[1] that they feel are "taking away" things they're entitled to. I can't count how many times I heard people complain about baggage fees when they were introduced, and no one ever had a response to "I never fly with baggage, why should I subsidize your propensity to overpack?". Even people who knew way better and would default to an efficient market assumption in every other possible scenario would assume that it was a naked cash grab, the benefits of which accrued entirely to the airlines. The same is true of complaints about Spirit Airlines: how DARE they give me the voluntary option of a low-priced flight without a bunch of (useless, costly) amenities that I feel entitled to? I can go on and on: credit card fees at liquor stores, etc etc. [1] In particular, rewarding consumers who reduce costs by passing on the cost savings.

ddxxdd 8y ago

Businesses are generally more competitive than people realize. The average person believes that corporate profits are typically in the 36% range, which is 5X higher than what reality shows: http://www.aei.org/publication/the-public-thinks-the-average-company-makes-a-36-profit-margin-which-is-about-5x-too-high-part-ii/ http://www.aei.org/publication/the-public-thinks-the-average...

xyzzy123 8y ago
Partly this is because profits are taxed, so it makes sense to shift profit into some other accounting bucket like capital expenditure / growth, offshore ip etc.

mruts 8y ago

There is a much much stronger historical precedent of businesses competing rather than colluding. Price fixing isn’t a Nash Equilibrium, and therefore, isn’t a stable state. The market will ruthlessly push prices on goods to their lowest profitable price by means of the marginal consumer. While price fixing obviously happens, it usually only happens in markets with a small number of producers. And even then, it will inevitably collapse. Look around, goods are very competitive nowadays. Computers are competitively priced, all goods on Amazon, nyc $1 pizza, food, gasoline, cars, clothes, etc. Very few businesses have the fat margins you claim are the norm. And the businesses that do are usually not producing goods, but renting services: telecoms, advertising, etc.

bookofjoe 8y ago

Concur. I've always been puzzled why self-checkout isn't, say 1% cheaper, considering how much labor costs in supermarkets and razor-thin profit margins.

wutbrodo 8y ago
This seems clear to me: customers aren't remotely rational, and will generally complain about economically fair systems[1] that they feel are "taking away" things they're entitled to. I can't count how many times I heard people complain about baggage fees when they were introduced, and no one ever had a response to "I never fly with baggage, why should I subsidize your propensity to overpack?". Even people who knew way better and would default to an efficient market assumption in every other possible scenario would assume that it was a naked cash grab, the benefits of which accrued entirely to the airlines. The same is true of complaints about Spirit Airlines: how DARE they give me the voluntary option of a low-priced flight without a bunch of (useless, costly) amenities that I feel entitled to? I can go on and on: credit card fees at liquor stores, etc etc. [1] In particular, rewarding consumers who reduce costs by passing on the cost savings.