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If everyone knows the price next week will be $10 instead of today's $3, why would the today's price be $3? Why would supermarket sell it for $3, if they expect
by xyzzyz 6y ago
If everyone knows the price next week will be $10 instead of today's $3, why would the today's price be $3? Why would supermarket sell it for $3, if they expect the price next week to be $10? Why not set it to $10 outright?
Opportunist speculators who buy up all of supermarket's stock aren't going to be in it for a long term: it's super high risk. They want to buy it cheaper than it should be, and sell for it for what the price should actually be. Holding onto product for long is very risky.
- TeMPOraL 6y agoBecause speculators create their own temporary price increase. $3 apiece may be a stable price in store, and the store sees no reason to increase it. And then a bunch of speculators show up, buy all the masks in the region, betting the local market will bear a price of $10 apiece. If the demand is inelastic enough - as it is with emergency goods - the market may very well bear that price, or even $20 apiece as people suddenly notice there are no masks in stores and enter panic mode. So the end result, in the best case where nobody got priced out, is that everyone now paid $20 for their mask where they could've paid $3. That money goes to a bunch of speculators who provided no value, no service, just seized the opportunity to extract rent out of the market.