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Comment by zozbot234 | Hacker News Reader

> And this permits companies to increase prices, and produce higher profits.

It's worth noting that this mostly reflects short-term pricing power. It takes a lot of time for new competitors to enter any industry. So we should expect these price increases to occur rarely and be somewhat time-limited as competition ultimately reestablishes itself.

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In ideal world. Stuff like groceries are such a rigged market that (well I'm sure somebody already wrote a book about it, recommendations?) it puts financial institutions to shame. Just a few brands own most of the stuff you buy [1] and then supermarkets have deals with those. Both protect each other.

I mean market finds its way, people can move to small stores and non-branded products if it gets bad enough, but to paraphrase, market irrationality can outlast people's well being.

I'm not in favor of some more regulations which usually only help big players, but corporations power steadily climbs and I expect it to become bigger than those of governments.

New big companies, some decent competition, come from places when there was none. They hardly ever can push themselves into existing markets. They create new ones. But we still need groceries, gas, electricity etc.

1. https://www.reddit.com/r/coolguides/comments/elzqf2/eleven_c...

Sure, but that assumes that people will do nothing in the long term that affects their spending behavior and will just eat the cost indefinitely.

If groceries tomorrow cost 10x I would not suddenly be spending 10x my current grocery bill. Luxury purchases like snacks, soda, premade sauces, candy, off-season produce, would be on the chopping block. Anything non-perishable would be bought in bulk during sales and wholesale clubs.

And for people who are already scraping by it would result in a 10x grocery bill which they can now not pay.

There's only so much money you can squeeze from a stone in the long run. Rising prices like this changes consumer behavior but can't make money appear out of nowhere. Since food is one of the easiest ways to belt-tighten rising prices across the board has the risk of reducing the wallet share food producers have.

> Just a few brands own most of the stuff you buy [1] and then supermarkets have deals with those. Both protect each other.

I buy almost exclusively store brands. Probably less than 5% of my grocery spending goes to name brands.

Who do you think makes the store brand and prints the label for Kroger?

In my country (Poland), it's various local suppliers. Some large, some mid-sized. Basically, whoever agrees to do the job for the least amount of money, it seems.

In the US its often just the brand name slapping a label on for the store. There aren't any local suppliers for things like paprika when McCormick already cornered the market 100 years ago.

Competition doesn't work correctly in modern economies because companies are allowed to buy their competitors. If you start competing with another company, they can essentially raise money to buy you and stop what would be the "normal" process. As a result, all theories that people have about how competition works don't apply as they think it should.

That can only go on for so long; if people see companies buying out competitors people will jump to create more and more competitors for the easy exit.

Will they? Only if they can. Tech industries are example #1 for this behavior. At some point very few people can create a competitor for Amazon, Google, or Apple.

Apple has lots of competitors and doesn't even have dominant market share.

Google is hard to compete with due to network effects, because they don't often miss tricks, and because they've invested so heavily in core R&D for so many years. The classical story about competition is that a big rich company becomes complacent and stops improving their products, opening a gap for new companies to enter, but Google hasn't really done that, they continue to tweak and try new things (arguments about search quality specifically for precise programmer queries aside).

Amazon retail is hard to compete with because it's not a very good business. They keep margins extremely low for not entirely rational reasons, which is why most of their profit now comes from AWS. AWS meanwhile does have competitors.

That would be true if not for regulatory burdens that larger companies can afford to shoulder. We just watched a progression from "OpenAI has no moat" to OpenAI begging Congress for regulations to stop them from killing grandma. If you can't get a foothold in the market there's no point in acquiring you.

What are some examples of this occurring?

How many times can they keep raising money to do that?

There's not endless liquidity in the system (until rates go to zero again).

These acquisitions end up paying for themselves. Just look at semiconductors, where some of the only "value creation" is in ever bigger companies buying each other. You have Analog Devices buying Linear Technology for $14B in 2017, then buying Maxim for $20B in 2021, both of them massive competitors and themselves the result of countless acquisitions over the years. And it repeats all over, Intel buying Altera, AMD buying Xilinx, NXP merging with Freescale..

You don't need to raise money to do that, because your profits being high from lack of competition allows you to build up a nice war chest, then spend it on protecting that lack of competition. It's not difficult at all, it's literally how every single area of commerce right now is owned by like two giant conglomerates. From tools to bathroom cleaners to crackers.

This works when the competitor goes public and thus can be bought in a hostile way.

Buying out and closing a completely private company is harder (though not impossible, given a right price).

This is rarely difficult when the buying company is large enough. You just need to offer a good multiplier for the current price of the private company. Very few private companies will turn down a generous offer, especially when the option is to compete directly with the larger company.

Except the leaders of a competitor will almost always take a big exit and let the private company be bought, because fuck you, got mine. You only need to convince a few people to take a payday, and most people are not running businesses out of some strongly held ideology of public market competition, but rather because they want to be rich.

I came here to make the same point - you are spot on.

Companies raise prices whenever they can and lower them whenever they have to. Which is true for everyone - we demand higher wage when we can get away with it and suck it up with lower comp when we can't.

To your point, companies can't max out the prices whenever they want (or an apple would cost a hundred dollars - why not?) They have to deal with a world of consumers and competitive response.

As a consumer, my response to a raised price could very often be to drop demand (I like apples but not at a $100 per) which then punishes the overall revenue of the supplier. It also draws competition (I wasn't gonna plant an apple orchard in my back yard but now that apples are super valuable, I will. And I am going to undercut your $100 apples to get the business.)

In general this process has worked to generate an affordable plenty for us. Lamenting something at a narrow point in time is myopic.

Maybe... but if competitors realize that the established companies can just lower prices once they enter the market, it might not make sense to enter the market at all.

This is how it works in a reasonably competitive economy. The economy is not competitive for the EU markets that matter and this means time beyond what you call short term doesn't see many new entrants.

Unless by long term you mean waiting until the EU has a competitive economy. That's not what most economists do.

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