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Genuine question. Why hasn't free market forced the prices to drop? If company X makes Y twice as cheaply, it could drop its prices like 20% and having way more customers and way higher profits. Why hasn't this ever happened?
Good question. I personally think it's because of conglomerates and large companies. Nestle has so many brands that it'd be a full time job to avoid their products. They are unfathomably huge, and so are many other food companies. They know how to play ball with each other, people have to eat, and they will pay anything.
Additionally supermarket chains likely play into it, same concept. Walmarts, targets etc killed off many small business and local grocery stores, they can also charge whatever they want. In fact the dollar store would go to tiny towns, compete and murder the local grocery with low prices, and monopolize the towns food needs with processed crap, these are called food deserts.
Not quite. I actually checked a couple years back and there was only 1 product that I bought from them: bagged Starbucks coffee. I just had to switch to a local coffee roaster to fix that.
That being said, I tend to make the majority of my food from scratch, but that's actually not that hard if you know what you're doing. Plus I don't eat snacks, which also helps.
Because "Free Market" is a myth.
Yeah, I always wondered this, why would competition lower prices? If something is selling at $100, why would I make it and sell it way below that?
Sure, I might give a small discount at first to lure customers, but once I have enough market share, wouldn’t I rather sell it for $100?
Competition lowers prices because ideally no one has a lot of "market share". Think about a small farm community where 10 people have chickens, 10 people have pigs, 10 people grow wheat, 10 people grow carrots, etc. Maybe everyone grows potatoes or something, so those aren't sold at the market. They're just eaten.
This is a situation where no one person can control the price of things, but they still fluctuate based on supply and demand. Say it's Christmas and everyone wants to make egg nog. The cost of eggs and cream will rise because farmers can't just increase the amount of eggs and milk produced. Say there's a crop sickness and half of the wheat dies. The price of wheat will rise, since farmers can't make enough to satisfy the demand for bread.
After both of these problems have passed, the prices will come back down because no one person controls more than 10% of the price for their goods. If one person charged $6 per dozen eggs after Christmas was over (everyone else charges $5, as normal), they would not sell very many eggs. The average price is not increasable by one person. And any one person could quickly sell all their eggs just by charging slightly less. (This assumes that goods are interchangeable in quality.)
Your assuming the sellers are not cooperating with each other.
Sure, at first it could be like that, but as time goes on, those 10 people would either form a group, merge into a few or just one, or even just at one point suggest to each other to keep a certain price.
My point is, there is no guarantee that the sellers would play by the “ideal rules” when they just have one goal.
I mean it's technically illegal, but then so are a lot of things.
Another thing that they could do that I just realized is following bad examples.
Once there are established players and one of them is big enough, it would just do a anti consumer practice for the sake of better profits, once competition notices sales didn’t drop significantly, competitors follow suite.
A great real world example is the headphone jack, replaceable phone batteries and the screen notch.
To some degree barrier of entry. Let's say I want to create a smartphone. I know it's possible to do it cheaper, without selling customer data or with special features.
You would need crazy amounts of start captial to even enter the market and the current leaders would make your entry as miserable as they could with huge sales and temporary minor pro consumer moves.
If you could get the captial you would probably fail there or cave and accept some kind of deal where you become rich and your company gets ingested and dissolved by current market leaders.
Well it has but it isnt going to be commented on. My house was built in 1899 and we have a shortage of closet space remember once getting annoyed and wondering out loud "did people just have less clothing at one point". I said that as a man who quite literally did an engineering internship with a textile machine company. Of course clothing has gotten a lot cheaper.
Now cost disease is hitting us all where it hurts so of course it is the thing we all comment on.
But hey we can't afford a degree, a doctor, a place to live, or to go to a restaurant anymore but on the plus side you can buy anything mass produced for very little.