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Efficient in physical terms, but not necessarily the most efficient in social terms. If we lived in a jungle, the epitome of capitalist systems, then we would have no choice. But we are humans, with social systems in place to insulate us from the jungle. The original term for economics was political economy, in recognition of this.
And I haven't even discussed market signalling among market oligarchs. For example, Coke and Pepsi sell sugar water. Nothing that can't be duplicated. But they never seem to compete on price. If they were competing on price, their profit margins would certainly not be in the double digits. They aren't collusive in the sense of holding meetings, but they have reached an agreement through market signalling, that they won't compete on price. The same goes for credit card rates. And many other goods. I think it becomes evident that we don't live in a truly capitalist system.
Coke and Pepsi try to differentiate themselves on non-price measures in order to insulate themselves from competitors who are trying to compete on price (e.g. store brand cola). This decreases the price elasticity of Coke and Pepsi, but not cola in general. That people choose them over store brand cola is indicative that they're selling an image or reputation, not just sugar water. Which is a pretty good example of capitalism in that they're competing to fulfil multiple consumer desires, not just to spit out a single uniform product like you'd see under other economic systems like communism.
I agree with your answer, but I think there's more. The smart people who work at those two firms realized that if they competed on price, as well as brand, they would basically end up with the whole market, but profits and executive compensation would be way less. Sure, they would wipe the cheap imitators out of the market, but that wouldn't compensate for the loss of revenue. So, they're not really competing with each other as I understand the doctrines of capitalism would suggest - they aren't going all out to capture the market with no holds barred competition.
I guess my view of capitalism is that there aren't gentleman's agreements. If these two firms competed on price, the consumer would still get their image or reputation, but at a cheaper price, the point of free markets.
If there was true competition between them, their financial results would look a lot like those of supermarkets.
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[–] ougNaHadNepVed 1 point -1 points 0 points (+0|-1) ago
Efficient in physical terms, but not necessarily the most efficient in social terms. If we lived in a jungle, the epitome of capitalist systems, then we would have no choice. But we are humans, with social systems in place to insulate us from the jungle. The original term for economics was political economy, in recognition of this.
And I haven't even discussed market signalling among market oligarchs. For example, Coke and Pepsi sell sugar water. Nothing that can't be duplicated. But they never seem to compete on price. If they were competing on price, their profit margins would certainly not be in the double digits. They aren't collusive in the sense of holding meetings, but they have reached an agreement through market signalling, that they won't compete on price. The same goes for credit card rates. And many other goods. I think it becomes evident that we don't live in a truly capitalist system.
[–] daskapitalist [S] 0 points 1 point 1 point (+1|-0) ago
Coke and Pepsi try to differentiate themselves on non-price measures in order to insulate themselves from competitors who are trying to compete on price (e.g. store brand cola). This decreases the price elasticity of Coke and Pepsi, but not cola in general. That people choose them over store brand cola is indicative that they're selling an image or reputation, not just sugar water. Which is a pretty good example of capitalism in that they're competing to fulfil multiple consumer desires, not just to spit out a single uniform product like you'd see under other economic systems like communism.
[–] ougNaHadNepVed ago
I agree with your answer, but I think there's more. The smart people who work at those two firms realized that if they competed on price, as well as brand, they would basically end up with the whole market, but profits and executive compensation would be way less. Sure, they would wipe the cheap imitators out of the market, but that wouldn't compensate for the loss of revenue. So, they're not really competing with each other as I understand the doctrines of capitalism would suggest - they aren't going all out to capture the market with no holds barred competition.
I guess my view of capitalism is that there aren't gentleman's agreements. If these two firms competed on price, the consumer would still get their image or reputation, but at a cheaper price, the point of free markets.
If there was true competition between them, their financial results would look a lot like those of supermarkets.