>There's something going on in the "pan selling industry" which results in very little "race for the bottom price" type competition - there are clearly many individual companies importing pans from China, but the "well known retail price" of those pans is ~$30 no matter which retailer you buy it from (within reason - at least within enough reason that all the $30 price-point retailers are still in business).
That's what I'm saying -- they don't compete with each other. There isn't enough competition that anyone decides to try to improve their market share by lowering prices, because it's just Bed, Bath & Beyond and Sears and such like "competing" with each other in any given local area, and not enough people buy housewares over the internet to move the needle against those guys.
>I think part of it is the audience - the "pan buying demographic" is probably a lot earlier in it's uptake of globalised web based purchasing than the demographic who's buying Arduinos and RasberryPis.
More than that, electronics are purchased in bulk by corporate purchasing departments. If you're buying 25 new devices every two years you may not be such a big fish that you qualify for a volume discount, but you're certainly spending enough money to justify a significant amount of comparison shopping, which means a high price elasticity of demand and an immediate market share advantage for retailers who engage in price competition.
>But like I said - I suspect it's "experienced companies" who are not exactly colluding or price-fixing, but who all know that it's better for _all_ of them to keep pans priced at ~$30 and have everybody make margins of almost $29 per sale, rather than end up trying to compete on price at $5/pan knowing that the total market for pans won't increase just 'cause the prices drop 85%.
The phrase you're looking for is "conscious parallelism." You get de facto collusion without communication by means of everyone adopting the strategy that they not be the first to engage in price competition. It works only so long as you have sufficiently few competitors that all of them religiously follow the strategy -- because having a third of the market with 5X the margins is more profitable than having the whole market at 1/5th the margins. The problem comes when you have more competitors, in which case someone decides they would rather have half of the market at 1/5th the margins than 1/15th of the market at 5X the margins, and believes (perhaps correctly) that they will be the one to survive a price war. This has basically been Walmart's business model for probably the majority of the products they sell, and Amazon et al are now doing the same thing even more aggressively on the internet.
Comments
>There's something going on in the "pan selling industry" which results in very little "race for the bottom price" type competition - there are clearly many individual companies importing pans from China, but the "well known retail price" of those pans is ~$30 no matter which retailer you buy it from (within reason - at least within enough reason that all the $30 price-point retailers are still in business).
That's what I'm saying -- they don't compete with each other. There isn't enough competition that anyone decides to try to improve their market share by lowering prices, because it's just Bed, Bath & Beyond and Sears and such like "competing" with each other in any given local area, and not enough people buy housewares over the internet to move the needle against those guys.
>I think part of it is the audience - the "pan buying demographic" is probably a lot earlier in it's uptake of globalised web based purchasing than the demographic who's buying Arduinos and RasberryPis.
More than that, electronics are purchased in bulk by corporate purchasing departments. If you're buying 25 new devices every two years you may not be such a big fish that you qualify for a volume discount, but you're certainly spending enough money to justify a significant amount of comparison shopping, which means a high price elasticity of demand and an immediate market share advantage for retailers who engage in price competition.
>But like I said - I suspect it's "experienced companies" who are not exactly colluding or price-fixing, but who all know that it's better for _all_ of them to keep pans priced at ~$30 and have everybody make margins of almost $29 per sale, rather than end up trying to compete on price at $5/pan knowing that the total market for pans won't increase just 'cause the prices drop 85%.
The phrase you're looking for is "conscious parallelism." You get de facto collusion without communication by means of everyone adopting the strategy that they not be the first to engage in price competition. It works only so long as you have sufficiently few competitors that all of them religiously follow the strategy -- because having a third of the market with 5X the margins is more profitable than having the whole market at 1/5th the margins. The problem comes when you have more competitors, in which case someone decides they would rather have half of the market at 1/5th the margins than 1/15th of the market at 5X the margins, and believes (perhaps correctly) that they will be the one to survive a price war. This has basically been Walmart's business model for probably the majority of the products they sell, and Amazon et al are now doing the same thing even more aggressively on the internet.