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David Floyd
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The bottom of a large bottle of beer
Jan 1970
time: 05:19
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quote:
On the other hand if B follows A will he gain a lasting increase in profit! |
No he won't. There is only a limited amount of money out there, and you can't assume that by raising prices one always makes more money. No matter which company does it, A or B, they will be better off selling at, say, $5, while the other company is still selling at $6. Sure, his price is 17% less, but it's a good gamble to assume that 17% will be more than made up by increased business.
Obviously, the other company sees this, and realizes they are losing money. They decide to lower prices too - but to go below $5, say, to $4.75. At this point these guys have the advantage, assuming the equilibrium price has not yet been reached. Let's assume the equilibrium price for cola - the lowest price at which increased demand will provide higher profits than higher prices will - is $3. Obviously, then, in an attempt to earn more money, the price war will continue, with the final price settling at around $3. This is good for the consumer, as they are paying only 50% of the maximum price they are willing to pay, and good for the businesses, because they are making better profits.
Now, let's look at government price ceilings. A price ceiling of $4 is meaningless, because in a real economy the price will not be above $4 for any significant time (probably 0 time, assuming both companies have competent market analysts). However, if the government sets a price ceiling of $2, on the reasoning that the companies are still making a 100% profit, this is bad for everyone. Once the price drops below equilibrium, the companies start getting into trouble. Decreased profits means laying off workers, making lower quality cola, etc., which is certainly not beneficial to anyone, and if this $2 price ceiling drives one of the companies out of business, this is certainly bad for the consumer, as it decreases choice.
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David Floyd
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The bottom of a large bottle of beer
Jan 1970
time: 05:19
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The Great Depression was caused because of overspeculation on the future value of companies. |
You sure the government setting tariffs and interest rates had nothing to do with it?
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Laws and enforcement of these laws. |
Precisely. A government's only just actions are to protect individuals from coercion and the initiation of force through laws and retaliatory force. In an economic sense, fraud is coercive, and the government thus has the obligation to protect my rights from being violated and protect me from being defrauded. Laissez-faire/libertarianism are not anarchist in nature.
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kolpo
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yes that is true if prices influences the sales of cola a lot(I(m here talking about absolute price not the relative one bewteen A and B).
But what if it is like the following, if cola has a very high neccesarity index:
1$= 100 sales total profit=0
2$= 98 sales total profit=98
3$= 97 sales total profit=194
4$= 85 sales total profit=255
5$= 70 sales total profit=280
6$= 55 sales total profit=275
Then would equilibrium price be around 5$ so would they most likely end up with a total profit of 400%. All costs including labor and advertising are only 1$. So if the government would here set a price ceiling of let's say 3$ would that help the consumers.
There are off course also factors who can break a virtual cartel:
-An aggresive power hungry(he finds market share more important then profit) competitor enters the market, bye bye virtual cartel!
-One of the 2 has lot's of money and things it may be able to completely destroy his competion: A starts to sell cola for 0.5$! B doesn't have much captital like A so B goes bankrupt(he sells with lost): after that has A an monipoly and can it sell at 5$ again but this time with double market share! This strategy is illegal in some countries.
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David Floyd
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The bottom of a large bottle of beer
Jan 1970
time: 05:19
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quote:
But what if it is like the following, if cola has a very high neccesarity index:
1$= 100 sales total profit=0
2$= 98 sales total profit=98
3$= 97 sales total profit=194
4$= 85 sales total profit=255
5$= 70 sales total profit=280
6$= 55 sales total profit=275
Then would equilibrium price be around 5$ so would they most likely end up with a total profit of 400%. All costs including labor and advertising are only 1$. So if the government would here set a price ceiling of let's say 3$ would that help the consumers. |
I'm really not sure where you're getting those numbers from - they seem very arbitrary. I can make up another set to illustrate my point.
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David Floyd
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The bottom of a large bottle of beer
Jan 1970
time: 05:19
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quote:
1$= 100 sales total profit=0
2$= 98 sales total profit=98
3$= 97 sales total profit=194
4$= 85 sales total profit=255
5$= 70 sales total profit=280
6$= 55 sales total profit=275 |
Those are the numbers I don't get - he said "what if" those numbers. Well, what if? One can't just assume sales figures like that for whatever product without legitimate research - all those numbers are, are made up numbers to support a point near as I can see. Granted I don't know a lot about economics, but I'm just saying - I understand his explanation of what those numbers mean, but not the numbers themselves.
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David Floyd
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The bottom of a large bottle of beer
Jan 1970
time: 05:19
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But I think my point still holds. Setting a price ceiling below the natural equilibrium is artificial, and just because it appears to save consumers money doesn't necessary mean it's beneficial, overall.
Further, the consumers already said they'd pay up to $6 in this example - why should the government come in and contradict that? If the majority of people felt the maximum reasonable price was $3, that's what they would have said.
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Wraith
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Austin, Texas, USA
Aug 1999
time: 23:19
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--"Yes, that's right. It's why USA get out of the Great Depression by using his ideas."
Now that's just funny. The actions taken using his ideas had a great deal to do with how long the Great Depression lasted.
--"Economics is a force like politic, and hence it can be as oppressive as politics."
One of us is totally misunderstanding the other. What you've said here makes absolutely no sense. I do not accept political suppression of freedom (although it can and certainly does happen), nor do I accept political suppression of freedom (ditto). As I've stated repeatedly, the only just purpose of government is to protect its citizens' rights. Rights are not protected by limiting freedom.
--"After a time: both are selling cola at 6 dollar and making maxium profit!"
Well, at least this guy is amusing. You might want to check into those supply/demand curve functions again. You'll probably be surprised to see where the point of maximum profit is. After all, keep in mind that if the price is $6 each, people aren't going to buy as many units. They'll find something else to drink. And then some small soda company using grandpa's root beer recipie will start up and make a killing selling at a lower price. You are oversimplifying things waaaay too much for them to be useful.
Edit:
Okay, fine. I posted in the econ-thread. Hopefully Roland or one of the others will come get a chuckle out of all this.
--"Mind you, it was the LACK of regulation that caused that."
Check your history. The exact same sort of thing happened many times before the Great Depression, and never managed to be more than a moderate recession. The banks were able to absorb the cycle without any particular difficulty. It wasn't until the government got into the act with the Federal Reserve Board that things really got screwed up. Between the ludicrous protectionist tarrifs and the incredible idiocy at the Fed, a minor recession was turned into a Great Depression and dragged on for years.
--"Got it. Laws and enforcement of these laws."
Um... did you not see me mention minarchism or something?
--"In 1987 and during the Asian crisis, there were LOTS of regulation : limited kracks."
Limited cracks... heh. No, just delayed-blast. The S&L collapse was caused by government interference (largely the idiotic blanket FDIC guarantees), for instance. Enron was certainly not a case of too little regulation, but a perfect example of why regulation doesn't work (without government guarantees people would have been rather more sceptical when looking over their statements).
--"Again, again, again : just as laws are required to ensure that no physical entity can infringe your rights, laws are required to ensure that no economic entity can infringe your rights."
And you are still completely missing the concept behind freedom.
Wraith
"He did not expect reasonable conduct from human beings; most people were candidates for protective restraint."
-- ("Stranger In A Strange Land")
Last edited by Wraith on 16-05-2002 at 04:07
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Akka
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In front of my computer.
Nov 2001
time: 06:19
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--"Economics is a force like politic, and hence it can be as oppressive as politics."
One of us is totally misunderstanding the other. What you've said here makes absolutely no sense. |
Sure, "I do not accept political suppression of freedom (although it can and certainly does happen), nor do I accept political suppression of freedom (ditto)." makes much more sense (don't really see the point of repeating twice the same sentence...).
Ok, I will spell it for you : politics is force. Economics is force. You can be oppressed by a political force (dictatorship). You can be oppressed by an economics force (social inequality, exploitation). Is that too hard to understand ?
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As I've stated repeatedly, the only just purpose of government is to protect its citizens' rights. Rights are not protected by limiting freedom.
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Rights are protected by ensuring no one is able to infringe them => coertion on people who want to infringe your rights. Same for economics.
Even when I was 6 I was able to understand such simple logic when the teached prevented us to bully/be bullied. If it's applicable to politics, it's applicable to economics, as both are forces.
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--"Mind you, it was the LACK of regulation that caused that."
Check your history. The exact same sort of thing happened many times before the Great Depression, and never managed to be more than a moderate recession. The banks were able to absorb the cycle without any particular difficulty. It wasn't until the government got into the act with the Federal Reserve Board that things really got screwed up. Between the ludicrous protectionist tarrifs and the incredible idiocy at the Fed, a minor recession was turned into a Great Depression and dragged on for years.
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Well, my history tell me something else, like it's the explosion of a "speculation bubble" which formation was possible because of lack of regulation, that made the crisis happening.
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--"Got it. Laws and enforcement of these laws."
Um... did you not see me mention minarchism or something?
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quote:
--"In 1987 and during the Asian crisis, there were LOTS of regulation : limited kracks."
Limited cracks... heh. No, just delayed-blast. The S&L collapse was caused by government interference (largely the idiotic blanket FDIC guarantees), for instance. Enron was certainly not a case of too little regulation, but a perfect example of why regulation doesn't work (without government guarantees people would have been rather more sceptical when looking over their statements).
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Same as above about "speculation bubbles". In fact, the cracks were attenuated because of emergency economical systems that were created post-1929.
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--"Again, again, again : just as laws are required to ensure that no physical entity can infringe your rights, laws are required to ensure that no economic entity can infringe your rights."
And you are still completely missing the concept behind freedom.
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Well, "not understanding the concept of freedom", coming from you, is kind of funny. Take a mirror.
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Akka
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In front of my computer.
Nov 2001
time: 06:19
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quote:
Originally posted by Wraith
--"Is that too hard to understand?"
You're just misuing terms. Economic inequality is not force. |
Politic inequality is not a force either. Politics is a force. Economics is a force. Both can be used as a weapons against a state. Both can be used for oppression. Both are able to make a country stand up or fall.
They are forces. Well, I think the word express itself quite well.
And as forces they can be used to oppress, unless there is regulation to ensure that they don't infringe the rights of people.
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--"Rights are protected by ensuring no one is able to infringe them => coertion on people who want to infringe your rights. Same for economics."
And, again, you are misuing your terms. Government does not coerce people to not infringe your rights, it punishes people who do infringe them (a subtle but important difference). |
Perhaps coertion wasn't the good word. I'll have to take my translator to see. I wanted to mean that to be sure people do not infringe rights of others, you have to make laws and apply them.
And it is the exact same principle that happen in economics, as economical tyranny is as possible as politial one.
quote:
--"Well, my history tell me something else"
*shrug* Up to you. I've posted in the econo-thread, so someone with a much better working knowledge of economic history than either of us may be along sooner or later. |
Perhaps, but well, even top-notch economics are still battling on the issue. I bet that anyone can bring here someone who has deep knowledge in economics ans still do not agree with at least half of the others.
quote:
--"Take a mirror."
I believe the phrase you were going for was "Take a look in the mirror", unless you really are asking me to steal a reflective surface for some reason. |
Nice one 
Well, yes, I meant that the same thing could be said about you.
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David Floyd
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The bottom of a large bottle of beer
Jan 1970
time: 05:19
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quote:
It's a made up demand curve. Graph a few. For instance try one with low, constant elasticity. Try a linear one. Learn to determine the monopolists profit-maximizing price. |
I fully understand that. My point is I can use whatever numbers I wantto make whatever curve I want, same as him.
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David Floyd
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The bottom of a large bottle of beer
Jan 1970
time: 05:19
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quote:
Perhaps coertion wasn't the good word. I'll have to take my translator to see. I wanted to mean that to be sure people do not infringe rights of others, you have to make laws and apply them.
And it is the exact same principle that happen in economics, as economical tyranny is as possible as politial one. |
And again, that is why I (and I assume Wraith) support laws against fraud.
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Wraith
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Austin, Texas, USA
Aug 1999
time: 23:19
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--"I wanted to mean that to be sure people do not infringe rights of others, you have to make laws and apply them."
See, this is the problem. You are refusing to recognize what I mean by a free market. A complete seperation of state and economy does not mean that government does not protect its citizens' rights, no matter how they're violated. A free economy does not mean you can force someone (by whatever means, including fraud) into something without expecting government retribution. You seem to think I'm advocating pure anarchy (ie. no government at all), when I am in fact advocating minarchism. What you mean by regulation is quite certainly not the same thing I mean by regulation, and very little regulation (using my definition, which is the accepted US political definition) has anything to do with protecting rights.
--"Well, yes, I meant that the same thing could be said about you."
I know, but you happen to be wrong. English is my native language, and I am fairly fluent. In school I was one of those obnoxious gits with a larger vocabulary than any of the teachers.
Also, as I've said, I tend to use Rand's definitions. I get into a lot of arguments involving things like selfishness where people refuse to acknowledge this, and it causes a lot of pointless arguing, just like here.
Wraith
"The great nations have always acted like gangsters and the small nations like prostitutes."
-- Stanley Kubrick
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David Floyd
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The bottom of a large bottle of beer
Jan 1970
time: 05:19
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quote:
Well, you're in college. Stretch your mind a little. Take a micro course. |
Yup, much as I hate math, economics is probably my next subject to get into (as in, outside of school, take a break from military history).
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Akka
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In front of my computer.
Nov 2001
time: 06:19
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quote:
Originally posted by Wraith
--"I wanted to mean that to be sure people do not infringe rights of others, you have to make laws and apply them."
See, this is the problem. You are refusing to recognize what I mean by a free market. A complete seperation of state and economy does not mean that government does not protect its citizens' rights, no matter how they're violated. A free economy does not mean you can force someone (by whatever means, including fraud) into something without expecting government retribution. You seem to think I'm advocating pure anarchy (ie. no government at all), when I am in fact advocating minarchism. What you mean by regulation is quite certainly not the same thing I mean by regulation, and very little regulation (using my definition, which is the accepted US political definition) has anything to do with protecting rights.
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Our fundamental difference of point of view is that I believe in a heavily regulated market. I think that any society is to serve the men that are part of it, hence the economy is a way to enhance the quality of life of everybody. I believe in partial wealth redistribution (I mean partial, I don't want the kind of total seizure like in communist utopia) and social welfare.
I think I can safely assume that you do not share my beliefs
quote:
--"Well, yes, I meant that the same thing could be said about you."
I know, but you happen to be wrong. English is my native language, and I am fairly fluent. In school I was one of those obnoxious gits with a larger vocabulary than any of the teachers. |
I won't blame you for this 
I'm an EXTREMELY nitpicking guy when it comes to vocabulary, syntax, spelling and the like in my native language. I hate to see a word misused, and I'm always trying to perfect my language skills.
In the mirror's expression, I just translated word-by-word 'cause I did not knew the english's expression and knew it was still understandable.
quote:
Also, as I've said, I tend to use Rand's definitions. I get into a lot of arguments involving things like selfishness where people refuse to acknowledge this, and it causes a lot of pointless arguing, just like here.
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Don't know anything about Rand's. Who is he and what are his definitions ?
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David Floyd
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The bottom of a large bottle of beer
Jan 1970
time: 05:19
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quote:
Our fundamental difference of point of view is that I believe in a heavily regulated market. I think that any society is to serve the men that are part of it, hence the economy is a way to enhance the quality of life of everybody. I believe in partial wealth redistribution (I mean partial, I don't want the kind of total seizure like in communist utopia) and social welfare. |
Translation - he believes in individual rights, and you don't. Right?
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Don't know anything about Rand's. Who is he and what are his definitions ? |
Ayn Rand (a woman) is a famous Objectivist who emigrated to the US from the Soviet Union and developed and set forth ideals for a free society and a just and moral government, including natural rights and laissez-faire economics.
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Wraith
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Austin, Texas, USA
Aug 1999
time: 23:19
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--"I think that any society is to serve the men that are part of it,"
Society is a fiction. It's just a group of individuals. Society therefore can not take precedence over the individual.
So, in the end what's best for "society" is what's best for every individual.
--"I think I can safely assume that you do not share my beliefs"
Nope, not at all. As soon as you proclaim that the function of some is to provide for others you have entered the realm of slavery, and I will have no part of it.
--"Don't know anything about Rand's. Who is he and what are his definitions ?"
Ayn Rand, founder of Objectivism, and (as David noted) a woman. Your question makes me guess you haven't been around the Off-Topic forum's political discussion long, since she tends to be mentioned fairly frequently (especially by me, a neo-Objectivist).
If you're curious, this site is a good resource. For the definition of selfishness in particular, try this faq response.
Rand is not much in favor with the philosophy schools. She has serious problems with philosphies such as Kant and Hegel, which dominate (along with their intellectual heirs) the colleges. She is, however, fairly influential. A US Library of Congress survey indicated that one of her books, "Atlas Shrugged", was second in influence in the US only to the Bible. If you plan on getting into a lot of arguments concerning philosophy, economics, and/or government on these forums it's probably worth your time to at least find out the basics.
--"I extend the individual rights to a longer-sighted point that's all."
It sounds much more like you're saying "the ends justify the means". I do not agree that any method that achieves a good end is a good method. I also do not believe that you are correct in assuming this will lead to a good end. In both the medium and long runs, we would be much better off with an actual free market economy. Wealth distribution and so on is inherently inefficent (and I do not mean corrupt or wasteful government; this is simply by economic definitions).
Wraith
"Indeed, a major source of objection to a free economy is precisely that it does this task so well. It gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself."
-- Milton Friedman
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kolpo
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quote:
Originally posted by GP
David, the exact numbers are not relevant. Try graphing a few and you will see. The point is that the supplier profit maximizing price is different from the price under free competition. He is just showing the process that a monoplist goes through to determine his best price. |
Yes indeed, off course are those number incorrect. My main point is that a virtual cartel is like a monepoly(the way the prices are formed), so that even with many competitors still a monepoly like situation can happen.
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16-05-2002 02:51
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