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PaperclipPerfector  9mo ago (text post)   3314 thread views

Friday Fun Thread for March 22, 2024

Be advised: this thread is not for serious in-depth discussion of weighty topics (we have a link for that), this thread is not for anything Culture War related. This thread is for Fun. You got jokes? Share 'em. You got silly questions? Ask 'em.

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Grocery stores will always need to have lower prices than an expedient restaurant like McDonald’s, otherwise few would eat at home. Consumers are more likely venture far away for groceries, because it can be cost-saving to do so. This is different from having only a few fast food places to go to on your lunch break. There may be dozens of grocers, some of which will not know their competitors’ pricings.

Going to any mall food court, I have a dozen different fast food restaurants to choose from. Even more if I'm willing to walk 15 minutes to places outside the mall. Your argument here seems to boil down to, "Once there is sufficient competition and lack of knowledge of pricing between businesses, then competition will bring prices down". But I don't see any plausible explanation why that emerges for grocery stores and not a mall food court. Especially since not all fast food items are equivalent. A Wendy's hamburger might be basically the same as a McDonald's Hamburger, but how does a local business sushi place and a McDonald's arrive on equivalent pricing?

And because the food is already purchased in bulk and perishable, grocers need to sell some food at a discount otherwise they lose more money in the whole. This is all very different than a fast food place with very efficient supply chains.

Sure, that explains some food discounts. It doesn't explain why they don't come up with an agreement in your model where all the grocers sell 1 litre pepsi drinks for $5 and the fast food restaurants sell them for $15, instead of what we have currently where grocers sell them for $1 and fast food places sell them for $3.

the scheme inflated the price of bread by at least $1.50

I am trying to look for a smart libertarian economist's opinion on the incident, and I can't yet find one. If I can find anything convincing, I'll let you know. But my default opinion, and I think the standard economist's response, would be that collusion can happen. Monopoly can let a single seller unfairly raise prices, and collusion can let competitors act like a monopoly. This was in an area with only seven big retail sellers, and two big bread wholesalers, that were all selling basically equivalent bread, so it was a relatively easy area for collusion. And even so, they didn't always act in sync, there was an incident in 2012 where they didn't increase prices and argued between themselves about it. And it was caught eventually, and they're getting punished for it. That sort of collusion is not common.

I promise you, if grocers can negotiate price increases amongst themselves over a period of 15 years in secrecy, they can surely decide not to lower prices unless their competitor does so (guaranteeing rarely-lowering prices). So you need a place like CostCo whose entire shtick is an ugly experience for lower prices. Even then, CostCo makes 30 billion in profit.

I agree that it's easier to coordinate not to lower prices. It's fortunate in that way we experience inflation and that it's quite rare that a fast food place manages any sort of improvement so dramatic that lowering their prices, even if their competitors didn't, would be a good idea for them.

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