From: rhinoceros (rhinoceros@freemail.gr)
Date: Sun Oct 26 2003 - 18:37:17 MST
[Ophis]
The same thing happens in the real economy. I can't just raise my prices because the breadmaker employee union has made me increase my employee's wages. The only way a producer can raise prices is if there is an increase in demand for the product. As a breadmaker, if I raise my prices without there being in increase in demand, I'll see a decline in sales.
[rhinoceros]
In fact, local breadmaker *employers* unions do increase their prices here from time to time, because "the cost of production" and because "the cost of life" has gone up. They would do it more often if they didn't need approval because government has classified the "plain" bread as regulated.
[Ophis]
Of course, we can suppose that all my competitors have to raise their prices too. So now ALL bread prices are higher and as a consumer, if you want to buy some bread you have no option but to pay a higher price. All bread makers will then see a decline in the demand for bread because people will start buying alternative products instead of bread (like pop-tarts or something).
[rhinoceros]
Since we buy our bread from one of the 3 bakers who are in a range of 500 meters, and we also have a preference for one of them even if he was a bit more expensive, and since we, like most people, prefer not to buy "prebaked" bread from the supermarket, and since will not buy any alternative product because we even eat bread with spaghetti, competition will not work here, except if something very extreme happens :P
I would understand your argument better if it was about pop-tarts, although I would probably drop them altogether.
[Ophis]
The appropriate response of the breadmakers at that point would be to lower the price of bread to gain market share in the overall bigger "food" market place.
All this said, all producers of all things cannot all increase their prices at the same time (as we've seen over the course of history). There simply isn't enough money to go around for this to happen (unless the government prints funny-money).
[rhinoceros]
Heh, in fact it is as if they did. A problem is that almost all prices go up at once in the supermarket. It is more about switching supermarkets these days than about specific products.
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