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Stay in the market because the competitor will be put out of business once their customers actually start filing claims. Then customers come back to you.
by Manuel_D 3y ago
Stay in the market because the competitor will be put out of business once their customers actually start filing claims. Then customers come back to you.
- pc86 3y agoThis only works if you can stay profitable enough long enough for it to start to happen. The fewer customers you have, the riskier your pool, and the higher your prices have to be. Suddenly $100 becomes $125 becomes $150 for the same or less profit. It's safer to just get out of the market entirely. You can always go back in but if you stay in too long it could wipe you out entirely.
- Manuel_D 3y agoIf all your customers are flocking to the undercharging competitor, you're out of the market anyway and your costs are effectively zero since you don't have anyone filing claims. There's no practical scenario where the competitor, which is losing money on each customer in aggregate, lasts longer than a company with no customers.
- sokoloff 3y agoPicking up nickels in front of a steamroller can appear profitable for a shockingly long time, as the traders using the "I'll just naked short VXX for easy money!" periodically find out.
- Invictus0 3y ago"costs are zero" Payroll? Overhead? Marketing? Rent? This isn't a thought exercise, there are real costs associated with being in a certain business.
- Manuel_D 3y agoAll of which the competitor also has to pay, on top of losing money on each customer.