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by Retric
2848 days ago
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In a ~3% margin business the difference between 1$ and 1.05$ is huge. But, nobody is going to be selling canned tuna out of their basement for under 10 cents profit on the can. Which is the real power of monopoly pricing, it's not obvious that spending 1.05$ is vastly worse than 1$ but it makes a huge difference to a companies bottom line. |
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The margins are only ~3% because the barrier to entry is low. Imagine what their margins would be if they had an actual monopoly on food.
> Which is the real power of monopoly pricing, it's not obvious that spending 1.05$ is vastly worse than 1$ but it makes a huge difference to a companies bottom line.
It's not obvious that spending $1.05 is vastly worse than $1 because it isn't. It's not even clear that the hypothetical five cents even exists -- if Walmart is charging $1.05 because their cost is $1, and they have no competitors because the next most efficient retailer has a cost of $1.07, Walmart is charging you less than the competitor(s) they put out of business, not more.
And that would still be true if they reduced their own cost to $.25 without lowering prices further, when no competitor could reduce costs in the same way, though that rarely actually happens. Squeezing 5% more out of a supplier is a lot more realistic than squeezing 75% more out of them.