4 ms·
If a company can hire someone worth $50/hr for only $5/hr and therefore make huge profits/margins, couldn't another company easily come along and undercut them?
by seiferteric 6y ago
If a company can hire someone worth $50/hr for only $5/hr and therefore make huge profits/margins, couldn't another company easily come along and undercut them? I don't think a scenario like that could exist very long.
- deleted 6y ago[deleted]
- jusssi 6y agoIf the other company can also do the same, why would they piss into their own cereal by reducing their profit? And if the other company is a newcomer looking to gain market share by undercutting, they'll likely find themselves strongarmed or bought out of the market.
- AnthonyMouse 6y ago> If the other company can also do the same, why would they piss into their own cereal by reducing their profit? Because that's how newcomers gain market share. > And if the other company is a newcomer looking to gain market share by undercutting, they'll likely find themselves strongarmed or bought out of the market. But then the high margins are still there, so the dynamic that attracts new entrants is still there. The markets that maintain high margins are the ones with barriers to entry. Which, of course, we try to avoid as a matter of policy, so any policy that relies on their existence is quite problematic.
- deleted 6y ago[deleted]
- CJefferson 6y agoBetween all the patents, it would be basically impossible to start a new mobile phone company from scratch which made its own chips, for example.
- collyw 6y agoI went looking for a new phone recently, there were brands I hadn't seen before on the shelves. Why you would need your own chips is beyond me, when you can buy them for a pretty small price.
- hajile 6y agoPatents are government-created monopolies and aren't free-market. The same goes with FCC and/or utility regulations. Copyright for the code running on those chips is another government-created monopoly. It is the most egregious because they establish those monopolies for a hundred years. Services like Straight Talk and others that sublease towers and bandwidth from companies like AT&T or Verizon have massively cheaper costs due to the lack of contract phones (lower risk), lower support costs, lower advertising costs, etc. These lower costs are then passed on to consumers in the form of lower prices to the point that Verizon or AT&T prepay services have changed in an attempt to compete and even their main contract service prices have lowered somewhat. As an aside, AT&T or Verizon actually rent most of their towers from other companies like American Tower or Crown Castle. They market how they're upgrading their towers, but that's not entirely true (they're basically bidding against each other on priority for tower upgrades).
- chc 6y agoUndercut them in what sense? Pay the employee even less for $50 worth of labor?
- aidenn0 6y agoSell the results of that labor for just $49.
- jayd16 6y ago>couldn't another company easily come along and undercut them? Not necessarily. A lot of factors might give one company an exclusive position. Another coal mine can't just open up. There might be a large barrier to entry into the market or it might just take time for a competitor to surface.
- asdff 6y agoThey sure could and do if labor is limited. If the supply of labor exceeds the demand, you wouldn't need to undercut; you and your competitor would advertise $5/hr and you would both get a worker. In our current world, we don't see chipotle trying to out compete mcdonalds on wages, so clearly for many classes of worker there is an oversupply of labor. Sometimes even in the real world things do flip, and there is a demand for low skilled labor that isn't being met. I overheard a few restaurant owners talking about the pandemic and their business while I was in line outside the grocery store a month or two ago. They bemoaned how no one wanted to come back to work at the restaurant since they were making more on unemployment. Neither brought up the idea of paying more if they failed to find labor at that price point in the market. Instead, they quipped back and forth about how lazy their staff are behaving after these owners themselves laid them off not too long ago and put them on unemployment in the first place. This anecdote is American capitalism in a nutshell, imo, just pure cognitive dissonance between the realities of the working class and the perceptions from the capital class.