The Cheapest Coke
Or why markets need to be regulated
We have all seen this economic question. Why are popcorns or snacks in cinemas so expensive? Here is another one. Why is the soft drink in any big supermarket or hypermart usually the cheapest in the area? You can try this experiment in any country. Go into a large supermarket look at the price of the soft drink (Eg. A can of coke). You will now have a more difficult task of beating that price. You can try discount shops. Or parallel importers. Happy shopping.
The truth is that the large supermarket or hypermart will under-price most retailers. The question why is more complicated. All retailers want to charge the highest price that the customer can bear. So why doesn’t the supermarket try to scalp me like the tourist traps? Why does it bother to put different items side by side for me to compare the prices? Why does the supermarket not coordinate with the beverage companies to fleece me?
Now, I am not praising the supermarket in any way. The supermarket sees me as a walking wallet. Or credit card. I am like a sheep that can be sheared many times but can be skinned only once. And once it has skinned me, the other sheep will keep their distance. Then it will have move its store to another location at some cost. So there is an incentive to fatten the sheep with junk food without killing them financially.
If the beverage company tries to raises its price, the supermarket will choose not to stock the item. There are still substitutes like Pepsi. If the beverage companies try to form a cartel, the supermarket can create their house brands. The supermarket can neither starve or go thirsty. At worst, it just have some empty shelves.
If you have to deal with the vendors separately, there is when all the tricks be unveiled. Take mobile data plans. Most companies do not want to compete on price so all the plans are usually difficult to compare. Moreover, if you are not familiar with the plan, you will be hit with penalty charges. They will be quick to change their terms and conditions when it suit them. If you try to change vendors, there is usually a penalty clause. I am not even going to talk about the fine print.
Markets
We want a place where trading is regulated preferably fairly. We want price transparency and price stability. Most importantly, we want to be treated like long term customers. Yet most businesses see long term customers as indentured servants. This when you want a middleman on your side that cares about you in the longer term. Like a supermarket or a government.