I don’t know - Coke thrives on trade secrets and branding. I don’t see how a free market could take away such advantages. More bargain colas may appear on the market, but I don’t think demand would shift away from Coke to the extent that it would fail to turn a profit.
In many ways a free market could help Coke. For example, if the US gov’t were not preventing oil companies from drilling on 95+% of US territory, oil would be cheaper and Coke could ship its products more easily. If nuclear power wasn’t banned, it could produce its cola cheaper. It could advertise cheaper, as the FCC wouldn’t limit the amount of over-the-air TV stations we receive. Its variable costs are all lowered. Competitors have access to these resources as well, but the question is “Does Coke’s success rest upon artificial economies of scale or other government subsidies?” I don’t think it does.
The endless reference of communists to corporations clearly demonstrates no understanding of what a corporation is. I just picture smoked out teens like Sum 41 every time I see it.
Trade secrets dissolve in a free market, for the most part.
If anyone (or practically anyone) can make “coca-cola” for approximately the same factor costs, then the market price is dependent upon which producer tolerates the least amount of profit over cost of production.
Someone once suggested to me (and it’s stuck in my brain ever since) that if brand names really mattered - if they really conveyed meaningful information about a product - then the brands wouldn’t have to advertise at all.
I disagree. Copyright and patents would (and should) be wiped out. But trade secrets are different. This isn’t the prevention of reverse engineering. These are contractual arrangements not to disclose information, with such people put in places to gain from keeping their secrets.
I don’t think any trade secret would permanently persist, but with smart management decisions they could persist for centuries.
without patents no pharma company would invest ~1 billion dollars to develop a new drug.
a company with a monopoly can easily drive all newcomers out of the market simply by lowering the costs until the small new firm is bankrupt or alternatively by giving strong incentives to sellers to distribute only their products. This is what microsoft, intel etc. are/were trying to do. Given that you are all for free market and no state intervention how would you like to see this resolved → or are monopolies ok after all?
this might need to be defended with an actual argument. you have just stated an assumption. besides which, the reason new drugs are so expensive to bring to market is related to government, for example the FDA
what definition of monopoly are you using? make sure its a good one…
One question that might be worth asking is this: from whence does the monopoly arise? They’re exceedingly rare in the absent of state intervention; more monopolies are granted/protected/enforced by States, than they are dissolved by States.
I think you mean “lowering the prices” because the firm isn’t capable of lowering its own costs on a whim. With that pedagogy out of the way, let’s proceed.
It is in-fact the player with a larger market share who has the most to lose from a price war like you suggest. Let’s say I have a monopoly on bread in my neighborhood (how I came to have a monopoly is beside the point). My cost is $4/loaf and I sell them at $5/loaf. One day, you decide to open a competing bakery, and you also charge $5/loaf. In a few weeks, you earn a 10% of the market.
I don’t like this, because you’re cutting in to my revenue, so I decide to lower my prices in attempt to drive you out of business. So I cut my prices to $4/loaf.
If your costs are more than mine, I’m likely to win this price war, and there’s nothing really wrong with that. If you want to beat me, you’re going to have to come up with a better product or a better price.
If your costs are less than mine, it’s unlikely that I win the price war. Here’s why: You’re able to match any price cut I make, and still earn a profit (or take a smaller loss). Let’s say I lower my prices to $3/loaf so I’m now selling bread for less than it costs me to make it. But maybe your cost is only $2.50, so you’re still making a profit. And since I have a 90% market share, for every loaf of bread that you sell at a profit of $0.50, I sell 9 loaves of bread at a loss of $1 each. (I am intentionally neglecting the demand component, which is probably not trivial in most cases.)
Now, maybe you say that’s not what would happen. The monopolist would lower his prices such that they were below his competitors’ costs in order to drive them out of business.
So the monopolist is now selling waaaaay below cost. For most price-elastic products and services, demand is going to go through the roof, excacerbating the loss-making scenario I describe in the example above.
Maybe he succeeds, driving the competition out of business. Now what? He’s taken enormous losses. So he leverages his market-power as a monopolist, and raises prices to a level higher than they were before the price war in order to make up the difference. But there are a lot of people who stocked up on the goods during the price war, when they were sold at ridiculously low prices. There is a glut of supply, of the monopolists own making, which now threatens his ability to charge monopoly prices. Even if this is not the case, the even higher prices incentivize more competition in the longer run.
How many of these price wars do you think a business could reasonably sustain, without some sort of explicit or implicit protection guaranteed by the State/Government?
you forget that your imaginary large company also sells 1000s of other products all across the globe so they are able to give the bread away in your town for free without even noticing the difference. the small newcomer company can last for 6 month and then is out of buisness.
Without government regulations, it would probably cost a lot less to develop a drug.
You mean one that the government granted? Because that’s the only way you can have a monopoly, unless you want to go with some trivial definition (like the 0 solution to an equation).
not really unless you consider testing the drugs before putting them on the market an unnecessary regulation (90% of the cost stems from the clinical trials).
Do you understand consumer sovereignty? do you understand that if consumers want experts to test to a certain standard they can offer to pay them to?
Do you understand that having a monopoly on testing makes the testers immune from consumer sovereignty?, and that the incentives become to such as to create barriers to the release of new drugs onto the market?
You can only measure things as they currently are and not measure things as they would be in the absence of heavy regulations. Comparing the microchip fabrication industry to the drug industry Microchip developers spend far more in time and research on developing new chips. Yet somehow they can sell their chips, at a higher manufacture cost, for less then drug companies sell theirs. WHy is that?
The truth is in the absence of all the government regulations manufacturing drugs would be far cheaper. The drug industry is one of the most heavily regulated industry in the nation.
And don’t respond with a non-sequitur answer of ‘who will protect the public from bad drugs’. Such an argument can only be made from shear idiocy. Who protects you from purchasing a bad toy for your kid? Who protects you from purchasing bad milk at the store? Who protects you from purchasing bad gas for your car? Why do all these other things work but somehow drugs need special attention?
Most “trade secrets” aim to protect things that could be reverse-engineered, or competed into transparency.