Then competitors, and complementary businesses, should stop fighting and come together, market together and increase both their chances at making more money.
Example: Hawaiian rental car companies, hotels and airlines serving the region should have a % of their marketing budget pulled together to promote going to Hawaii.
> 1) All firms start doing it...because what Producer wants to leave money on the table?
That seems to just skirt around the issue. The basic (Econ 101) point of competition is that if all existing firms are making 100 units of profit, and a new firm can make 50 units of profit by offering an equivalent product at a lower price, then that new firm will take business from the existing firms.
"Suppose there's two competitors, one does all the work of creating or inventing something new. The other just copies it. Costs nothing, it's a sure thing. I'd love to be that guy"
The first company controls the market the second responds. The second is always later to market. Without those development costs company 2 has more money but they need to use it to reduce prices to get others to try their product and they need to spend it on marketing.
If company 2 has another advantage like unlimited money or relationships.. they can kill company 1.
> I'm not sure that 2 makes for sufficient competition, but it certainly beats one.
This is a very interesting point.
Competition only benefits consumers when there is sufficient choice to subvert collusion. Given the examples of US politics, US car manufacturers and the like, I would surmise that this likely requires more than 3 relatively equal competitive actors to be meaningful.
Also, don't underestimate taking away revenue sources from your competitors. If your competitor competes with you at A, but makes money at B, then taking away that B revenue stream affects their ability to compete with you at A as well.
If a company creates better kitchen equipment that allows one shop to make better food, isn't that the same thing? Is it now rent-seeking that anyone who can provide an advantage can potentially sell that to all the shops so they all remain competitive and not lose market share?
You’re not reducing competition, you’re increasing profit margins and supply of customers. The market incentivizes more competition to reduce profit margins.
? but you are wrong. Buying your competitors is only possible because you offer them more than they agree they are worth. Why would you do that? because reducing competition will earn you more money through your anticompetitive actions.
How do you reach this conclusion? Businesses working together to increase each of their profits is what every business relationship to strives to be.
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