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Why do they bill $700 for a bag of salt water they paid $1 for? (1) 1. https://www.advisory.com/daily-briefing/2013/08/27/the-secret-of-salines-cost-why-a-1-ba

Why do they bill $700 for a bag of salt water they paid $1 for? (1) 1. https://www.advisory.com/daily-briefing/2013/08/27/the-secret-of-salines-cost-why-a-1-bag-can-cost-700 https://www.advisory.com/daily-briefing/2013/08/27/the-secre...

Rury 3y ago
A major part of business of former employer of mine, involved simply buying parts from another business, doing things to try and hide who the OEM was, and having salesmen resell it for a large markup without doing anything else to the parts. A major reason it did this, was because it subsidized the other side of the business which often lost money in the short term, but resulted in growing this profitable side of the business. If things were priced correctly, the money losing side would have charged more its services, and this profitable side cheaper. However, if they did just that, the demand may have not of been there to sustain or grow the business like it had. I honestly hate this sort of stuff though. When I pay my toll on the highway, I expect it to pay for maintaining the road I used, not for unrelated things. Anyhow, may be a similar kind of thing going on here, or you know... just flat out profiteering.
- lotsofpulp 3y ago
  >When I pay my toll on the highway, I expect it to pay for maintaining the road I used, not for unrelated things This is a great example. You expect to pay for the "maintenance of the road", but what about the ongoing opportunity cost of the road and all the externalities of the road? What about all the roads that do not have tolls on them? The toll road does not exist in a vacuum, and life is not so simple so as to be able to sequester all costs into separate line items. In fact, one of the main uses for tolls is not for the maintenance of the toll, it is for managing congestion of the road, since the road has a carrying capacity. After a certain number of vehicles, the road becomes less and less useful, so a variable rate toll can ensure a limited number of vehicles operate on the road at peak congestion. It is simply not feasible to tie revenue to expenses 1 to 1, and specific taxes (like tolls) legislated to do that for government expenses hamstrings leaders because it removes flexibility needed to move resources around (which obviously could be used for bad, but also good, as you demonstrated your business's example).

Rury 3y ago

A major part of business of former employer of mine, involved simply buying parts from another business, doing things to try and hide who the OEM was, and having salesmen resell it for a large markup without doing anything else to the parts. A major reason it did this, was because it subsidized the other side of the business which often lost money in the short term, but resulted in growing this profitable side of the business. If things were priced correctly, the money losing side would have charged more its services, and this profitable side cheaper. However, if they did just that, the demand may have not of been there to sustain or grow the business like it had. I honestly hate this sort of stuff though. When I pay my toll on the highway, I expect it to pay for maintaining the road I used, not for unrelated things. Anyhow, may be a similar kind of thing going on here, or you know... just flat out profiteering.

lotsofpulp 3y ago
>When I pay my toll on the highway, I expect it to pay for maintaining the road I used, not for unrelated things This is a great example. You expect to pay for the "maintenance of the road", but what about the ongoing opportunity cost of the road and all the externalities of the road? What about all the roads that do not have tolls on them? The toll road does not exist in a vacuum, and life is not so simple so as to be able to sequester all costs into separate line items. In fact, one of the main uses for tolls is not for the maintenance of the toll, it is for managing congestion of the road, since the road has a carrying capacity. After a certain number of vehicles, the road becomes less and less useful, so a variable rate toll can ensure a limited number of vehicles operate on the road at peak congestion. It is simply not feasible to tie revenue to expenses 1 to 1, and specific taxes (like tolls) legislated to do that for government expenses hamstrings leaders because it removes flexibility needed to move resources around (which obviously could be used for bad, but also good, as you demonstrated your business's example).