Would general packaged produce like crisps (chips) and chocolate that have “Fabulous Instant Win!” prizes be cheaper to consumers if they didn’t have these prizes?
Perhaps this question is an IMHO thing, but there might be someone out there who has direct knowledge of this kind of thing.
Although we don’t see the price fluctuate on an item that has some kind of ‘prize’ attached to it, is the price nonetheless held higher than it might have otherwise?
This is just a WAG, but I would say “no”.
The free giveaways are a marketing idea to convince you buy that particular product over any of its competitors. If the company sells more products, it will increase profits and this will allow it to offer the product at a lower price, again increasing its sales.
If all companies agreed to stop any freebie promotions, one would appear, break the agreement and ream the rewards, as comsumers would then buy that product over all the others.
(This is very simplified, but you get the idea.)
IANA economist but I took a graduate-level econ course (lo-o-o-ng ago).
Aro uses sound reasoning. Prices are the result of supply and demand. Offering prizes is a way to compete without lowering your price, and you can be sure that the company does not expect to make less money by giving away a prize. And as long as consumers are willing to pay more for the chance to win, the price stays there. If there were no more prizes, the demand and supply curves would probably both change, and it might be cheaper, but it might not.
There is a common misconception that the sale price of a good is somehow directly related to what it costs the seller to provide it. Although that is a component, it’s not the whole story, so simply making a product cheaper to provide does not automatically mean that the consumer gets a lower price as a result.
No… prices would be much, much cheaper if the companies didn’t pay for advertising campaigns (commercials, magazine adverts, product placements, etc…).
Didn’t General Mills or one of the other cereal companies say they were going to stop offering coupons for their stuff and just lower the price because they did not think it was cost effective for them to run the coupon programs any more?
It depends on the market. If it is perfectly competitive, no, nobody can charge what the market mandates.
Damn. Let me rephrase that.
It depends on the market. If it is perfectly competitive, no, nobody can charge other than what the market mandates.