[bryanlarsen]

Pricing for almost every item is set by the lowest price the producer is willing to accept, not by what people are willing to pay.

It's the "one price rule" in economics.

Everybody is willing to pay different prices. If you're starving, you're probably willing to pay "all my money" for food. But you don't, you pay the same price as everybody else who aren't willing to pay that much. The seller can't set the price to "all your money" because somebody else will be willing to sell for less.

> but every player in a market has little reason to do so when they’re enjoying the higher profits.

In that case any producer willing to defect from this implicit pact and lower their prices slightly will be able to make all the profit. Anti-trust should be ensuring there are enough producers that there's always somebody willing to goose their profits at the expense of their competitors by lowering prices.

It should be, but isn't.

[rileymat2]

You are describing theory, which is fine as a model but it is an imperfect model. There are a host of reasons this falls apart in reality.

[bryanlarsen]

In reality these work very well for many of the important things. Ask any farmer who sells a 60 pound bushel of wheat for $6, producer of $10 blue jeans or maker of those $400 60" TV's. They're not swimming in profit.

The exceptions are far fewer, but far more noticeable. Housing and health care don't follow the one price rule. The exceptions dominate our mindshare because they're so painful, but the non-exceptions outnumber the exceptions.

[phil21]

One price rule for commodities isn't super relevant for consumers though? Commodified markets are well understood so long as there is decent competition.

What we are increasingly seeing on the consumer side of the market - even on grocery items - is price segmentation. Grocery stores (moreso their suppliers) learned that many (most?) consumers are willing to pay much more for staple food items that are not commodities but quite common buys. Like chips or soda or branded packaged foods. They set a regular retail price to 50% more than it was a few years ago over time, and then to capture more of the price sensitive consumers they offer incentives like coupons, in-app deals, random sales, etc. to induce those consumers to purchase.

This is getting to be extremely aggressive and will continue to do so for the foreseeable future. Uber/Instacart for example have plenty of whistle blower insider types who have written about how price segmentation on an individual basis based on personal information and habits happens. Such as the type of credit card on file (Amex holders get charged more), how much gift card credit balance you have, your trends like accepting higher prices once from a given location/destination pair and time, etc.

If you go to the McDonalds drive-thru and simply order at the window you will be likely paying considerably more than the person who has the app installed and orders through that method.

Airline tickets perhaps follow this model as well - browser history and cookies will present a higher price to one consumer vs. another for the same book at exactly the same time. Some court cases are attempting discovery on this recently, so it will be interesting to see if true.

The price of an individual consumer transaction is absolutely set to what the company charging it believes the market will bear. Increasingly that "market" is the size of exactly one consumer.

I listened to a few earnings calls for fast food and consumer staple companies during COVID. Executives were absolutely incredulous that they could continue to increase prices and have it not impact volume of sales much if at all. What was taught in MBA school simply was not reality on the ground, and COVID times exposed this fact. The US consumer at least as a whole has simply lost the ability to price shop and is not as price sensitive as the textbooks say. This may change, but it's the current state.

About the only thing producer prices set is a pricing floor.

[platinumrad]

Not a single post in this comment thread isn't just describing theory.

[NooneAtAll3]

double negative, so... every comment does?

[platinumrad]

Yup.

[halJordan]

Yeah but, that vagary is literally the exact same wording that can be applied to "prices are set according to what consumers no; not it's value" that sparked this thread.

[mpalczewski]

only true for commodities