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What do you think of Internet outrage of companies raising their prices, chiefly companies like Netflix and fast food restaurants? I think morally, it seems pretty iffy- it's a free market, and if they raise their prices, you can just stop buying what they offer. If the government got involved to set any sort of price ceiling, I think that'd definitely be a bad idea that'd lead to a shortage of some sort.
But if the outrage lets customers act as a pseudo-monopsony which gives them more power, I also don't really mind if they're able to use it to demand cheaper prices, even if I think the accusations of corporations being evil are vastly overblown. Especially when it comes to keeping the price of something like Netflix low, where much of their value comes from having exclusive rights to stream old shows and movies instead of all revenue to them going towards making new stuff or improving technology. If consumer outrage keeps the Netflix price $5 cheaper than it otherwise would be, is anything hurt besides shareholder bank accounts?
Large companies have zero incentive to reduce prices when they know that their competitor will do the same. McDonald’s has actually sued 12 of the major national meat suppliers for price-fixing simply based on the fact that each supplier knew the others’ pricing due to a shared analytic tool. All it takes is one reasonably intelligent analyst at the meat supplier board room to ask “so what happens if we lower our prices” for all to realize it’s an unprofitable move.
https://www.fooddive.com/news/mcdonalds-sues-meat-companies-pork-price-fixing/637572/
https://www.atg.wa.gov/news/news-releases/ag-ferguson-s-price-fixing-lawsuit-nets-105-million-washingtonians-tyson-foods
https://www.agriculturedive.com/news/agri-stats-sued-by-DOJ-for-role-in-meatpacking-antitrust-scheme/695196/
If you are McDonald’s and there’s a Wendy’s across the street, you have two options. You can both keep your prices high and split the pool of consumers 50/50, knowing that stressed American consumers will continue to buy your slop because it is time-efficient and they have formed a habit to your addictive slop. Or you can lower your prices, which the competitor will do next week, which leaves you back to the first option only with less profit. Of course they don’t do this. But if a brand new competitor moves in who doesn’t play ball, perhaps they will do this to squeeze him out — no new competitor can compete with the supply chain and the institutional knowledge of McDonald’s.
It’s an entrenched mythology of capitalism that companies lower prices based on competition. This hardly ever works in the real world. There’s no reason, for instance, for OnlyFans to rake in billions of dollars when anyone can create a similar site. But OnlyFans isn’t profitable because their service is better, but because the pornographer who operated it made the site a meme among the public (a kind of psychological rentseeking), because he had the previous institutional knowledge and capital to do this. And you see with car dealerships, there’s no reason for any used car dealership owner to make tens of millions. But in an intensive competition what they do is compete over psychologically manipulating the vulnerable, so the car dealerships compete over misleading pricing plans, overpriced itemization that the customer doesn’t have the knowledge to dispute, etc. It is horrifically inefficient and immoral as a system and it is only maintained due to various mythologies in the public imagination.
So I take it you're a socialist or communist of some sort?
What do you think it is that stops McDonald's from charging $10 for a bottle of water?
They can’t charge an amount that is so noticeably higher that you remember it and buy a pack of water for 1/20th of the price at a store. But they can (and do) overcharge on water, understanding that they can get away with it because it’s an inconvenience for you to get it elsewhere. That’s extremely economically inefficient, because McDonald’s surplus profit goes disproportionately to already-wealthy individuals. (It’s better for a nation to have more people with more money, versus some with extraneous wealth that doesn’t provide any benefit in terms of happiness or entrepreneurship or invention or culture.)
It would be more efficient if, for super-sized corporations, an agency stepped in and “auctioned” off the corporate positions and ownership according to who will do the job for the least amount of money, then pass the saved money to consumers. If that’s too much government interference, then allow the employees to form powerful unions, because the employees are more likely to identify with the interests of the consumer and stand to gain less as individuals from purposeful economic inefficiency.
There are a lot of problems with communism. People should be paid up to 10x more than median wages for performance, because humans have an instinct to be rewarded according to performance, that’s deeply evolutionary. Humans also have an instinct to care for things they own, and you see this in small businesses and entrepreneurship. The answer is a balance that accepts the importance of human instinct while also realizing that primitive capitalism can get harmful, antisocial and inefficient. For large corporations, no one should feel like they “own” it, and these trend toward pseudo-monopolies due to institutional knowledge accumulation and established supply chains. For a problem like used car dealerships, we should have some kind of Honesty Regulation akin to Cicero’s grain merchant at Rhodes thought experiments. The policy should make it so that even a very dumb person can immediately tell that something isn’t in his economic best interest.
How would private investment into companies work in your system?
Why wouldn't the store just raise their price to $5, colluding with McDonald's in a similar manner to how the Wendy's does?
Edit: P.S I think for the most part free markets are very effective and there are only a few areas where the government needs to intervene, such as carbon emissions. I am asking questions because I think you're very wrong, but I'm not yet entirely sure what the root causes of your mistaken beliefs are.
New businesses typically lower prices so that consumers try out their business, as consumer behavior is based around habits and attachment to routine — lower prices break this cycle. If you’ve noticed this is why newly opened stores have sales / deals. McDonald’s also may be over-pricing an item and at the same time a new competitor can’t compete due to economy of scale
Thy will have to invest based upon the idea that the business they invest in is actually valuable to society. If it is valuable then it will grow and profit for a period, and if the profits are too extravagant than the Government steps in — and this is a good threat because it makes investors vote for boards that lower prices themselves, lest the government step in.
Then this is better than if they didn't exist, and there were no economies of scale. They can't go below the threshold of what other competitors can compete at, so they have to be at least as good. Any better than that, and that's just free additional value to the consumer.
I'm guessing that investing in expanding the business, research and development, etc. etc. counts in the costs, and lowers profits? Because then many enormous companies operate without profit. If that doesn't count, then you're harming the companies, leading to less economic prosperity. Most companies don't pay out dividends. I imagine it would mostly be small businesses where they just take it as profit, but people seem not to like going after small businesses. Did you realize that it's them that you are targeting mostly?
Edit: That last bit is unfair; I haven't actually checked frequency of dividends.
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