[paulmd]

Costs don't drive prices though. Products are priced at whatever the consumer will pay, and if they won't pay enough then the product doesn't get made.

Price competition is an idea that exists but it's plan Z for any business. It's the last resort when you can't produce a superior product or find another niche that justifies higher margins. Think AMD vs Intel here.

No sane businessman has ever woken up and decided to slash his profit margin just for the hell of it. You can tell by the fact that businesses make profits - that wouldn't happen with perfect competition.

Nobody wants to be the low-margin high-volume product, because you're only a bad quarter away from low-margin low-volume. And once you're in it, it's a really hard pit to climb out of.