What does "What the market will bear" mean?

Great Debates
21

Since scalping is illegal (in many states) I hope that all scalpers loose their shirt(s).

It is not a good example to bring into this discussion.

So let me address some of your comments:

Airline tickets are hard to judge. I don’t have sufficient knowledge of the costs of jet fuel/insurance/overhead in that industry to know what a reasonable price is. My dad, who worked in the industry for 20 years, always says he can’t believe some airlines can make a profit with the low fares he sees, and judging from the airlines’ state of affairs, he’s probably right.

As to my antique dealer, I did challenge these so-called businessmen and both insisted that the price I’m seeing is the correct price; that it didn’t matter that I saw it cheaper the previous day. Neither would admit that it was the interest of ONE customer (me) that caused the price rise. And yes I bad mouth these kinds of people whenever the occasion arises. I am not a customer you want to piss off.

I believe that the analysis of 1 customer price P, 0 customers at price 2P is not correct here. It should have been
0 customers at price P . 1 customer at price 2P. That is not supply and demand; the existance of 1 customer. That is trying to pull a fast one, instead of being thankful someone is willing to buy an “albatross”.

And for the record I now strike while the iron is hot; I no longer tip off merchants that I’m interested in something.

Yes - there are just as many shithead customers as sellers. Never a question about that. There’s no excuse for that either.

I think you should, as a businessperson, strive to maintain the good will of your customers, and tampering, gouging, is not the way to go. Similarly, customers should never expect soemthing for (practically) nothing.

Explain the gasoline station bullshit tactic of raising prices on inventory already in his holding tank because oil prices have risen.
How are they connected? What made pre-existing gas more valuable? When he takes delivery of more expensive inventory then the prices should go up. And when oil drops, drop the gas price when you take possesion of the cheaper gasoline, not before.

22

Why should they care? Because you’ll spout off some childish invective?

Ah - but it’s not your business. They have every right to charge whatever they like and suffer the consequences.

You greatly over-estimate your effect on the antiques market.

Thus speaks the man who told an antiques dealer to fuck off.

23

The fact that he can charge more for it. Seriously. Value is determined by how much people are willing to pay for it, nothing more.
Do you think that the owners of all the small shops put out of business by Wal-Mart and Target should have expected loyalty from the customers who decided to save money by going to the large Mega-Marts? People don’t react that way, they look out for their own interests and shop where things are cheapest. Store owners similarly sell things for what they can get, higher prices mean more profit.

Sorry, but that’s just silly. Your analysis of the price of things means nothing. That’s the definition of supply and demand. Once you expressed interest in an item, and called back, you’ve given the merchant more information. The idea that he should be “thankful” doesn’t enter into it, he’s trying to maximize his profits and is willing to sit on the item for a while. Perhaps he didn’t think it was an albatross?

24

Hey I am as polite as the next guy, normally, but I will call a person what they are if I feel they’re treating me improperly. Interesting to note that none of them got offended, or tried to say “this is business”. They wrote me off, fine, it was a mutual feeling.

And Telemark, the item in question had obviously been lying around for months judging by the dust (neighnoring items were clean). It was long forgotten until I expressed interest.

I have friends who are in business and should have taken this up with them. I do know I’ve seen them get happy when somebody bought an odd item they had in inventory for a long time. I don’t believe they raised the price at the last second either, but I will check. Isn’t that supposed to be part of Economics 101 (as some of you love to tout). Isn’t old inventory supposed to be a bad thing?

We’ll just have to agree to disagree on this.

And as for you PapierMachePrince:
“You greatly over-estimate your effect on the antiques market.”

No - I just know I will not tip off my interest in an item anymore.
I will buy if I like the price that I see at the time.

But maybe you were trying to be humorous - I’ll let it slide.

25

What makes the gas in the ground worth more? You said the price of oil had gone up. Since gas is made from oil, does it not stand to reason that the value of gas has gone up?

As long as there is competition there shouldn’t be a problem.

Put it this way. Suppose you are a gold dealer. You buy gold for $300 an ounce and sell it for $305 an ounce. You have 1000 ounces in storage. Suddenly the world price for gold goes from $300 to $400. What should you sell your gold for?

OK you do the “right thing” and sell it for $305. Problem is everyone and their brother and competing gold dealers want to pay $305 for your gold. So you run out quickly. They then turn around and sell this gold at the world price of $400 (why would they sell it for less?). You buy new gold to sell at $400 an ounce.

So you see this makes no sense.

What if gold prices fall to $200? How much gold will you sell at $305? None. Why would anyone pay $305 when the world price is $200?

So you see people with your level of illogic go out of business quickly.

26

They why didn’t you buy it when you saw it? Once you left, then called back, it was clear that someone wanted it, it suddenly became more valuable. If you had looked at it, asked the price, then moved on, maybe they would have lowered the price in order to get you to buy. Are the dealer’s actions moral? That’s another debate, but they followed supply and demand rules.

An antiques dealer probably has lots of old inventory, I bet stuff sits there for long periods of time before the right buyer comes along. In some businesses (such as car dealerships) there is great push to move old stock, but I doubt there’s much cost to keeping some antiques lying around. Perhaps they don’t dust to give the impression that things are neglected and they want to move them. It could give them a leg up in negotiations.

You thought you were doing the dealer a favor. He thought that he could maximize his profits by raising the price on you. That’s all part of the system, maybe he’ll drop his prices when you show that you won’t pay the higher price. Maybe he’ll stop using this technique if enough customers walk away and never return to the store. But it’s his store, he’ll sink or swim based on the results.

Negotiating tactics are a world unto themselves. After spending some time in the markets of Nepal and Thailand I’ve learned huge amounts about supply and demand. Nothing in this world is truly a fixed price, especially in an antiques market.

27

You are making the false assumption that everything has some inate, enduring value. Not so. Supposing your theoretical gas station owner (Bill) had 10,000 gal of gas stored up. Across the street, his competitor (Ann) was just running out. Ann gets her supply of new gas at the higher price. If they’re the only game in town, at least 2 scenarios can emerge. Ann figures that Bill will keep his prices low, so she eats the loss, charging the same low price as Bill, until Bill has to raise his prices when he gets a new shipment. Or, Ann decides she can’t afford the cash flow loss and immediately raises her prices. Bill then can either fallow suit right away, or try to take market share by keeping his prices low. Neither stratgy is right or wrong. It all depends on the knowledge the merchant has, his cash flow situation, and his long term busness plan.

You are looking at only one varible (the wholesale cost the merchant pays) when there are many, many variables that go into the retail price you pay as a consumer. One of these variables could be the stupidity of the merchant, as in the antique dealer case you described (if it ring true that he lost a sale and is stuck with unwanted inventory).

As I’m sure you know, there was a great experiment recently in Russia and Eastern Europe to set prices without a market mechanism. It didn’t work.

28

John Mace may have hit it on the head. I was indeed arguing from a position of enduring value.

As to the gold analogy, I don’t think its relevant.

Gold is typically acuqired with the sole purpose of buying low and selling at a higher price. No pressure to sell if the price drops below what was paid. It’s not a sell-through market like gasoline.

29

As for the gold analogy, dealers in gold sell gold. That’s their job at least as I presented it. So it holds perfectly.

Dealers of anything dont’ “buy low, sell high”. They buy and sell slightly higher if they can.

What would a gold dealer do if he bought gold at $300 and the price went to $200? Using your illogic he would just wait until the price went back up to $300 and if it never did he would just sit in his store with his overpriced gold until he went out of business.
That doesn’t happen. They buy gold every day and sell gold every day.

If you’re in the market for gold coins, or had any common sense at all, you would realize this.

30

There’s no reason to be “attacking” in this discussion. I started this thread with the intention of being educated; not insulted.

You’re relatively new here so I will refrain from retribution.

Be careful not to escalate your insults lest moderators decide you’re not a nice person and ban you.

31

Coming from a man who told a couple of antique dealers to “go fuck yourselves,” this attention to good manners is puzzling. Actually Bob - you are relatively new here, or you’d be aware that the mods are not pleased with threats of “retribution” either.

32

I know I’m relatively new too, but not as new as my friend bri1600bv.

Being rude to merchants whom I perceive to be nasty has nothing to do with being rude during a discussion of ideas.

I’ve seen worse sparring in other threads with no moderator intervention. In my post I clearly state I am refraining from retribution. That is not a threat.

It was a friendly warning about what mods could/would do because I have seen them ban folk (for trolling, etc).

I find it quite irritating that people who have a differing viewpoint cannot simply state it without personal attack.

I don’t mind someone saying I have a flaw in logic. I resent being told I have no common sense; they are not one in the same; one clearly addresses the statements made, the other the person making the statement.

33

Bwana:

Interesting that you openned this thread when you did as I was mulling over a very similar thread I had in mind after reading a Newspaper artivel about “Price Gouging”. The articel was about the cost of gas in CA and the potential for State action to counter said gouging. IANA economist, so I’m unsure if gouging has a precise definition that includes anti-trust type collusion among suppliers, but in the popular press it simply means charging more for something everyone wants without a “real reason”.

Anyway, the tone of the article was similar to your idea that merchants are only allowed to make a certain profit, and anything above that is “gouging”. Of course this concept is only applied to so-called necessities, so it really makes no sense. If you live on the coast in the Southeastern US and a hurricane is threatening, you will find that flashlights, batteries, and kerosene are suddenly more expensive. Call it gouging if you want, but it’s simply a matter that those items have become (temporarily) more valuable than at other times. No product has an absolute value.

Another example is something I recently encountered with my ISP. Last month I noticed my bill was significantly larger than it had been, so I called them to see what was going on. The woman who answered the phone informed me that when I signed up 6 months ago, I had been given a 6-month introductory price and now I was to pay the standard price. Normally I would’ve said: “Oh, I forgot all about that, you’re right.” Instead, I added: “Hey, can you extend the discount for another 6 months?” She put me on hold for a few minutes and then, to my surprise, said simply: “Yeah, we can do that. I’ll change your account right now”.

So, what is the “true” value of my monthly ISP rate? Is it the standard rate I would’ve gotten if I hadn’t asked or is it the reduced rate I got by asking? There simply is no answer to that question. The value is whatever we mutually agree on.

In the US, we are used to going into a store, seeing a price and then paying it. In other cultures, everything is negotiable. I think we will be seeing more and more of that here in the near future.

34

John Mace - well put, thank you for your observations.

As to gouging , it can have consequences to the merchants. Personally, if the local gas station that I normally give all my business to, gouged me during a crisis, I would remember that fact later when prices stablized. I would probably not patronize him again.

Say everyone raised their price to $3.00 a gallon. A merchant might go with the crowd. Or, he could charge $2.00. He will sell out his supply faster than everyone, yes. Will he make as much profit as his competitor, no, but so what? He has made a profit and maintained the good will of his customers. I think merchants/stores get too caught up on comparing their bottom lines with their competitors. Why isn’t enough to make a profit, the one that you were happy just days ago before oil prices went up?

How are you losing?

35

Customer goodwill is certainly part of the overall equation. My guess is that selling gas is pretty impersonal, so that is not too much of a factor. I’ve been buying gas at the station a few blocks from my house for 15 yrs. Yet I can guarantee you the owner has no idea who I am. On the other hand, the owner of the Mexican joint I eat at frequently knows me by name and often comps me beers or whatever. I guess it depends on your overall business strategy.

36

So, suppose the opposite happens. Suppose the merchant just bought a million gallons of gas and the next day the price drops 40%. All the gas stations around him waited and now have cheap gas. But you, of course, would be happy to pay 40% more for your gas, wouldn’t you? Because after all, you were happy to pay that just days ago. How are you losing by continuing to pay the same price?

And, of course, you would never buy cheap airline tickets where the airline does not make a profit, would you? No, of course not. You would insist on paying full fare and not taking advantage of a bad market for the airlines.

yeah, right.

37

I work for a company that advices what price to charge. I analyze data and routinely advise what price a product/service should be.

First of all, ‘fair market price’ is not a digit, it is a range. Product X, for example, could have a fair market price range of $19.95 to $29.95. The store could sell it for $27 and make a nice profit but have less or losing market share or at $20 with lessor profit but gain (or hold) market share.

The upper part of the range is determined by the customers and how much they would pay. The lower part is determined by the cost involved in the product/service. A product considered unfairly high by you might still be in the fair market price range because many others do not consider it too high.

That really is the trade off - market share and profit. People want to make as much money as possible but they also must mind market share. My clients will have a preference of ‘I am willing to not gain market share in orer to profit’ or ‘I am willing to not make much money in order to gain share’. Sometimes, though rarely, you will see someone willing to sacrifice market share for $$$ or willing to lose money to gain share rapidly. These last two are rare. Usually they wish to maintain share and make a good profit or not make much profit but gain share.

The cost of making the product/service is irrelevant to how much it costs. Serious. However, if someone makes huge amounts of profit they will attract competitors in droves. The reason OPEC doesn’t charge $60 a barrel for oil to squeeze the rest of the world is that they do not want others to be profitable to find more oil in their countries or develop alternative energy sources. They could gouge and really profit in the short term but in the long term they would lose huge market share.

There are products that people would be unwilling to pay for, even if they maker made very little money. Diamond ball bearings for instance :slight_smile:

Another interesting thing, to me, is multiple-tier pricing. This really pisses many people off but it is when a business charges customer A more than customer B. Reason? Customer A is willing to pay a higher price.

Consider Pizza Hut. They have a two-tiered pricing system. Want a large pizza - that will be $16 please. Oh, you have a coupon? Then that will be $10. People willing to pay $16 will pay it. Others more price concious will search out the coupon (which is always available) and pay $10. There are many examples of multi-tiered pricing structures. One of my clients charges different prices by regions. Reason - some regions have more wealthy people. I recently helped them define these regions and the price difference by region is significant.

Amazon.com made some people mad because they once charged people in different zip codes more money.

I digress, but fair price is a range, not a fixed value. This range also changes over time.

38

The most common two-tiered pricing system? Senior citizen discounts…

39

To be in business is a RISK, not a guarantee of success or wealth. If it were guaranteed everyone would do it.

Actually I am brand loyal when it comes to gasoline, I do not switch to save money. Gas would never drop 40%, like it never jumps 40% so your exaggerated example is baiting.

As for cheap airline tickets, hey brother, count me out. I will not fly with an airline who’s not doing well financially, or is underpricing their fares. I would not trust their maintenance or security. And in case you ask, I haven’t flown in 3 years, and even then my company always paid full fare to keep their reticketing options fully open.

AndyMurph64 - thank you for the education
sailor - thanks for trying

40

Who said otherwise? The risk of huge losses is compensated by the possibility of huge profits. You are the only one who seems to object to the profits but not to the losses.

Well that’s a disingenuous response if I ever saw one. We are not talking about you as we have already determined you are not a representative consumer, we are talking about how the market as a whole behaves, the people as a whole. They certainly do not keep buying expensive stuff when they can buy it cheaper. So, let me rephrase my earlier post to get around your silly and childish objections:

Yeah, I can imagine you don’t consume product X and you don’t mind paying Y% more but you are not a normal person. Normal people do consume product X and do pay less if they can. That’s reality. you might not like it but there it is. or do you think companies are thinking “What would BwanaBob do?” No, they are thinking "what would normal people do? How can we get normal people to buy? "

Here we go with the silly arguments again. Normal people who DO fly try to pay as little as they can. Why would you be buying from suppliers who are making good profits and shunning those who are not? It contradicts your OP. Now you are saying that those who cannot make a profit should be shunned by the buyers who should only buy from those who do make profits. . . therefore increasing their profits even more. Your policy of shunning suppliers who are having difficulties just helps them go bankrupt which narrows the supply, which means higher prices. You should be encouraging competition which is what keeps prices low. In any case, do you ask for a balance sheet before you buy from a company? How do you know how they are doing?

:rolleyes: