Remember the theory that prices are set by supply and demand? I remember William Buckley being asked "what regulates greed?" His response was that prices are set by market forces, and competition ensures that prices to not excessively exceed overhead. If the overhead decreases, competition will drive prices downward.
So you have Eric Cantor explaining why prices aren't dropping now that the taxes aren't being paid. His response to their pocketing of the taxes, "that's what business does."
Originally posted by Kunsoo Remember the theory that prices are set by supply and demand? I remember William Buckley being asked "what regulates greed?" His response was that prices are set by market forces, and competition ensures that prices to not excessively exceed overhead. If the overhead decreases, competition will drive prices downward.
So you have Eric Cantor explaining ...[text shortened]... s-does?via=blog_1
So apparently there is no competition. Done dare say "collusion."
Is your point that the ideas that businesses want to make money and that competition reduces prices are mutually exclusive?
Originally posted by sh76 Is your point that the ideas that businesses want to make money and that competition reduces prices are mutually exclusive?
No, I'm saying that the fact that the airlines are collecting taxes they aren't paying with the prices staying the same either means that there is no competition, or that competition does not drive prices.
Originally posted by Kunsoo No, I'm saying that the fact that the airlines are collecting taxes they aren't paying with the prices staying the same either means that there is no competition, or that competition does not drive prices.
Just to be clear, you are saying that since they aren't lowering prices because they don't have to pay taxes, they are doing something wrong?
Originally posted by Kunsoo No, I'm saying that the fact that the airlines are collecting taxes they aren't paying with the prices staying the same either means that there is no competition, or that competition does not drive prices.
Or that fuel costs are rising...
In any case, competition obviously does drive prices. How could anyone think for a second that it does not? Haven't you ever had a local diner or tire salesman or furniture store cut their prices because of new competition.
Originally posted by sh76 Or that fuel costs are rising...
In any case, competition obviously does drive prices. How could anyone think for a second that it does not? Haven't you ever had a local diner or tire salesman or furniture store cut their prices because of new competition.
Competition may be a factor in pricing but pricing is the choice of last resort in competition in a capital-intensive business where amortized costs just keep on going and half-empty planes have to burn the same amount of jet fuel anyway. Competing on the basis of brand loyalty via various psychological and financial incentives, superior flight schedules, on-time performance, airport and flight comfort and amenities, and just plain habit, are preferred. What the airlines are counting on is the business flyer and his/her travel office not giving a moment's thought to the airline's capture of the revenue previously collected as tax.
So, like gasoline prices, it makes sense that air ticket prices are IMO, managed as closely to a cartel as the price-setters can legally can get away with.
I've stopped believing in the law of supply and demand for oil/gas prices long ago. What ever happened to the drop in oil prices due to the release of all that oil a month ago?
Since July 4 the price of gas around here went up and stayed there. Oil companies believe this is the price we are willing to pay and we are so I guess that's the real law that determines price: how high can we have prices and people still buy it?
Originally posted by dryhump Just to be clear, you are saying that since they aren't lowering prices because they don't have to pay taxes, they are doing something wrong?
Well, actually, that they are collecting money and representing it as taxes which they are not paying, they are committing fraud. But no, that wasn't my point. The point is that competition either does not exist, or it does not impact prices. It makes no difference in the price whether we tax or not, so therefor the perennial argument that raising taxes will impact the consumer is specious. We have the experiment, all variables accounted for.
Originally posted by sh76 Or that fuel costs are rising...
In any case, competition obviously does drive prices. How could anyone think for a second that it does not? Haven't you ever had a local diner or tire salesman or furniture store cut their prices because of new competition.
So the price of fuel (which has actually decreased recently, but let's just take this for argument's sake) just happened to up the price in precisely inverse proportion to the decline in price due to the fact that they aren't actually paying the taxes they are collecting for a complete wash - all time perfectly!
Wow! Synchronicity! Talk about the invisible hand!
Originally posted by JS357 Competition may be a factor in pricing but pricing is the choice of last resort in competition in a capital-intensive business where amortized costs just keep on going and half-empty planes have to burn the same amount of jet fuel anyway. Competing on the basis of brand loyalty via various psychological and financial incentives, superior flight schedules, on-t ...[text shortened]... es are IMO, managed as closely to a cartel as the price-setters can legally can get away with.
In other words, prices are driven by what the market will bear, and if we increase taxes, for the most part the industries will have to eat it rather than pass it on to consumers.
This is what liberal economists have argued for years, as well as numerous studies. We just have the clear proof now.
Not the first time actually. But a profound one, hopefully with everybody watching.
Originally posted by Eladar I've stopped believing in the law of supply and demand for oil/gas prices long ago. What ever happened to the drop in oil prices due to the release of all that oil a month ago?
Since July 4 the price of gas around here went up and stayed there. Oil companies believe this is the price we are willing to pay and we are so I guess that's the real law that determines price: how high can we have prices and people still buy it?
Yep. What the market will bear. Businesses don't compete. They find that equilibrium. They know their fellow "competitors" won't adjust their prices too much. There doesn't even have to be a conversation and so no "collusion."
The rules have been rewritten several times since Adam Smith.
Originally posted by sh76 Or that fuel costs are rising...
In any case, competition obviously does drive prices. How could anyone think for a second that it does not? Haven't you ever had a local diner or tire salesman or furniture store cut their prices because of new competition.
Reid managed a temporary deal, so the revenues will be collected.
Which means now, due to the taxes, and those rising fuel costs, the prices will go up, yes?
Originally posted by Kunsoo Well, actually, that they are collecting money and representing it as taxes which they are not paying, they are committing fraud. But no, that wasn't my point. The point is that competition either does not exist, or it does not impact prices. It makes no difference in the price whether we tax or not, so therefor the perennial argument that raising taxes will impact the consumer is specious. We have the experiment, all variables accounted for.
Lease an aircraft, hire a few staff, canvas a few passengers, walla, competition.
I wish you every success, you'd be doing something constructive rather than being a whiny bum.
Originally posted by Kunsoo In other words, prices are driven by what the market will bear, and if we increase taxes, for the most part the industries will have to eat it rather than pass it on to consumers.
This is what liberal economists have argued for years, as well as numerous studies. We just have the clear proof now.
Not the first time actually. But a profound one, hopefully with everybody watching.
Originally posted by Kunsoo In other words, prices are driven by what the market will bear, and if we increase taxes, for the most part the industries will have to eat it rather than pass it on to consumers.
This is what liberal economists have argued for years, as well as numerous studies. We just have the clear proof now.
Not the first time actually. But a profound one, hopefully with everybody watching.
At any one moment there are millions of prospective projects being planned, from the largest corporation planning a mine site, refinery or airline start-up all the way down to the individual planning to renovate the kitchen. Eveyone has a line they draw, above the line the benefits of the new kitchen out weigh the extra overtime needed to be worked to pay for the kitchen, below the the line the project is just not worth it.
Taxes artifically raise that line and everytime it does, a few thousand productive effort projects just don't get done, stop punishing people for doing good things.
I agree that half of the equation is "Charge em what they will pay." but it is only half the equation, to say hiking taxes has no effect and the cost will just be borne is naive' beyond belief, but then it is a kunsoo post.
"That's what business does"
04 Aug '11 16:10
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