[AnthonyMouse]

> 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.

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.