You can login if you already have an account or register by clicking the button below.
Registering is free and all you need is a username and password. We never ask you for your e-mail.
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.
Isnt that just them trying to tweak the elasticity of their own demand curves in order to increase the proportion of total surplus that is producer surplus by lessening the proportion that is consumer surplus?
view the rest of the comments →
[–] 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.
[–] daskapitalist [S] 0 points 1 point 1 point (+1|-0) ago
Isnt that just them trying to tweak the elasticity of their own demand curves in order to increase the proportion of total surplus that is producer surplus by lessening the proportion that is consumer surplus?