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Re: Wrong info "." (archive)

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Posted by . on September 28, 1999 at 01:41:05:

In Reply to: Wrong info "." posted by Adam M on September 27, 1999 at 13:47:50:

Okay, point by point.

Mike W. knows a little about antitrust. Just enough to sound credible to the less informed but not enough to mount truly credible arguments --so let's set aside that failed white knight right off the bat.

Your soda example. That $1.99 price on the label is just a promotional device to make you feel like you're getting a real bargain. If coke somehow went to a fixed price system, that $1.99 price will go down to a more realistic level. (Otherwise, Pepsi will eat their lunch.) What level? Something very very close to the average price coke sells for under the non-fixed price system. Hence, those who were buying at $1.99 benefit, and those who were buying at $.89 get hurt. It's a wash right there on who benefits and who gets hurt.

Your Saturn/Bose paragraph. There, you just made my case --you didn't like the product for the price so you went and bought from their competitors. ***Just because there is uniform pricing doesn't mean average prices will suddenly get jacked up. There is still the competition to worry about.***

Now, it may be too bad for you that if BMW switches to uniform pricing you can't play one dealer against the other. But for other shoppers who don't know how to play the game, they'll actually be paying less under uniform pricing. ***BMW will still have to compete with Mercedes, Audi, Volvo, Saab, etc. so they can't suddenly jack up their prices just because they switch to uniform pricing.***

The lessons of the past. About 20 years ago the Feds started moving away from the aggressive old-style antitrust action. Guess what, how good has the economy been doing since?

Finally. Now, by the letter of the law, is coercive uniform pricing illegal? Yes, but there are very big loopholes. If the manufacturer couches it as part of a larger promotional strategy that enhances the brand image and thus benefits all dealers, AND, more importantly, there are competitors out there to impose some price discipline, then there's a lot of leeway for uniform pricing. And courts are very lenient these days --they really look for whether the vast majority of consumers are getting hurt. Which will not happen if it is a market with many competitors, like the automobile market for example.

Okay. I'm done. No more on this topic. DoctorBimmer will be really upset at us for talking way over his head.




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