- Capitalism and Alternatives -


Posted by: Stoller on November 30, 1999 at 18:43:37:

In Reply to: competition only comes into play if demand is insufficient for the needs of all the producers. posted by DonS on November 30, 1999 at 10:35:06:

Don: If your factory is running at full production making candy bars, and you are having trouble meeting demand at $100 per candy bar, why would you drop your price to undercut the "competition"?

I suspect your adherence to the STV (last seen as farce here) and my fealty to the LTV (explained succinctly here) has prevented our dialogue from having much merit...

You posit that 'demand' (consumer demand) motivates the market. This, I believe, does violence to the facts. Example: there is plenty of demand for affordable HEALTH CARE in this country but because PERSONAL COMPUTERS are more profitable to make, supply chases the easier dollar---which, in turn, affects 'demand' overwhelmingly.

Veblen: '[B]usiness enterprise is a pursuit of maximum net gain in terms of price, not of maximum production in terms of goods' (Absentee Ownership [1923], Beacon Press 1967, p. 382, n. 26).

Don: If you have good reason to think you can drive the competition into the ground and then put the price of candy bars as high as you want, that *may* be a possible motivation. You will have to accept lower profits while the price war is in effect, and you have to be able to "win" the price war for it to make any sense.

When I speak of competition, I do not especially refer to the superannuted notion of price competition. I refer to competition of production process (which includes labor), advertising, and---especially---access to special privileges and subsidies maintained by the government.

: What will likely make the most sense is to not undercut the competition's prices, and to optimize your own profits.

I think you, me and Veblen are in agreement here.

Don: The point is that competition only comes into play if demand is insufficient for the needs of all the producers.

Consumer-motivated 'demand' as a theory went splat here.

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