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Re: Look at it this way (archive)

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Posted by . on September 28, 1999 at 10:04:30:

In Reply to: Look at it this way posted by MikeW on September 28, 1999 at 09:19:57:

: You're mixing economics and law. The two don't necessarily have anything to do with one another. If this type of pricing does hurt the consumer, it would be pretty easy to prove, especially givin the nature of the discovery process in a lawsuit. I'd sue GM and a couple of their larger multibrand dealers. I would then supeona all of the sales invoices from the dealers for the last couple of years. I (actually a small army of temps) would bang the invoice information into a computer, and than do a statistical analysis. If it shows that in similar situations the Saturn pricing model results in higher net profits for the dealer, and/or higher per car profits for GM, I think you've got a pretty strong case that the consumer has been harmed. Tie this to the fact that it stems from a anticompetitive practice (coordinating sales prices between dealers), and the defendants would have a pretty hard time disproving the case.

Yes law and economics do not always mix, but in this case if you can discover all you want but the economics of the case will shoot your lawsuit down. --You will find out that Saturn does not have significantly higher profits. Why? Because it is in a market that is extremely competitive. The U.S. economy car market.

For a long time in fact, they weren't making money. And if Saturn was making money hand over fist, do you think GM would keep the rest of their product line on non-uniform pricing?

So okay, let me lay it out as plainly as I can. Repeat after me, everyone:

1. Uniform pricing by one manufacturer in a market with many competing manufacturers does not suddenly allow the uniform pricer to charge monopoly prices. Uniform pricing is not monopoly pricing.

2. What uniform pricing does is remove the variation in prices across dealers. However, the profit-maximizing (for the mfr) uniform price will just be the average price in the non-uniform price regime. Some dealers and consumers will get hurt, but other dealers and consumers will benefit.

3. Uniform pricing, especially in a competitive market like the U.S. car market, is not a monopoly devise, it is a promotional/marketing devise. It helped Saturn to stand out from the crowd despite a basically mediocre product. It spurred dealers into focusing their competitive energies on things like service and "dealer experience" that Saturn decided would be it's selling point, rather than on price cutting.

Oooh, DoctorBimmer's head must be spinning by now.

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