Is central price control an anti competitive practice?

mylastparadigm

Loads of shops have the prices of their products dictated to them by a head office.
We are told to shop around and believe in the 'free market'. but it would appear to me that if you have prices dictated by someone removed from the site of competition, they wont be aware of local market value.

no manager of a shop can dictate prices of goods in these cases even if they are aware their prices are too high compared to local prices.

anticompetitive because - all the local shop has to do is stay just below the prices of the shop with no say in their prices. no competition. it creats a cartel actually.

drunkmonkey

Not going to happen. Most local stores have closed down and most town centers are now dead because of multinationals but the penny is now only dropping that the Irish consumer has handed over all it's business to one or 2 stores, namely, tesco, centra and dunnes.
Now there taking the piss with prices and you want a store that offers the flexibility to change it prices at a local level the same as the locally run stores used to be able to do.

The price control is one thing but what's getting me is the lack of choice of products, same crap in every store and way over priced. Can of coke was 99cent in my local store and 50cent in spar. Now local store is closed and spar is at a €1.

coylemj

So by 'free market' you think that the Tesco shop in Stillorgan should compete with the Tesco shop in Nutgrove?

How can they do that when neither of the respective managers has any involvement with sourcing the products that they sell?

Clearly you don't understand how the retail trade works.

dudara

This is more of an economics question - moved accordingly.

dudara

jimmycrackcorm

mylastparadigm wrote: »

Loads of shops have the prices of their products dictated to them by a head office.
We are told to shop around and believe in the 'free market'. but it would appear to me that if you have prices dictated by someone removed from the site of competition, they wont be aware of local market value.

no manager of a shop can dictate prices of goods in these cases even if they are aware their prices are too high compared to local prices.

anticompetitive because - all the local shop has to do is stay just below the prices of the shop with no say in their prices. no competition. it creats a cartel actually.

What makes you think they don't do this? I've noticed centra and spar shops selling the same items at different prices.

andrew

Are you sure local shops don't have any leeway over the prices they charge? And even if they don't, why wouldn't a central office have enough information, given they have the accounts of multiple shops in the area?

mylastparadigm

what i had in mind was prices of xbox games in gamestop v hmv v xtravision v argos etc.

andrew

Are the prices in all those shops the same?

mylastparadigm

andrew wrote: »

Are the prices in all those shops the same?

i cant promise you total accuracy here but i know as fact that gamestop prices are dictated from head office - all same. manager has some discretion to sell 2nd hand broken stuff cheaper (like games with no covers). same in extra vision (for new games atleast).
hmv - i dono, i only go into one on grafton st. but i imagine fifa 2012 will cost you the same in dublin as it will in cork.

andrew

mylastparadigm wrote: »

i cant promise you total accuracy here but i know as fact that gamestop prices are dictated from head office - all same. manager has some discretion to sell 2nd hand broken stuff cheaper (like games with no covers). same in extra vision (for new games atleast).
hmv - i dono, i only go into one on grafton st. but i imagine fifa 2012 will cost you the same in dublin as it will in cork.

Maybe it's just more efficient for a chain to tell all it's shops to price everything the same. Perhaps it doesn't think it's managers have enough information to price games properly. Maybe having the same price simplifies administration. Maybe it enables HMV to compete more easily with Xtravision in the games market in general. As in, if HMV wants to beat Xtravision, it needs to be able to determine the price of it's stuff everywhere, instead of leaving it up to the managers.

mylastparadigm

andrew wrote: »

Maybe it's just more efficient for a chain to tell all it's shops to price everything the same. Perhaps it doesn't think it's managers have enough information to price games properly. Maybe having the same price simplifies administration. Maybe it enables HMV to compete more easily with Xtravision in the games market in general. As in, if HMV wants to beat Xtravision, it needs to be able to determine the price of it's stuff everywhere, instead of leaving it up to the managers.

i can tell you the reason why its centrally controled in the case of gamestop: they dont trust their staff on the floor. hey, and the other reason, if they compete with best prices that means less profit! they make tons of cash from gran or mum or dad just going in and asking for a game their kid want - no shop around or research. gamestop know this and price accordingly.

andrew

mylastparadigm wrote: »

i can tell you the reason why its centrally controled in the case of gamestop: they dont trust their staff on the floor. hey, and the other reason, if they compete with best prices that means less profit! they make tons of cash from gran or mum or dad just going in and asking for a game their kid want - no shop around or research. gamestop know this and price accordingly.

Yeah, there are lots and lots of factors which go into setting a particular price; why do you think it's not competitive that they decide to price they way they decide to price?

mylastparadigm

andrew wrote: »

Yeah, there are lots and lots of factors which go into setting a particular price; why do you think it's not competitive that they decide to price they way they decide to price?

the way i look at it, if you have 200 (made up number) shops that all set their prices to compete with each other and everyone else, then you have a more true free market. if you have 200 shops with all the same prices, you have reduced competition.

by my poor understanding of economics, that makes sense to me. surely if you have more shops competing for my dollar, ill get a better deal?

as an aside the definition of a cartel: An association of manufacturers or suppliers that maintains prices at a high level and restricts competition.
im not accusing anyone of anything really, but is central pricing for huge numbers of shops like having a cartel?

andrew

mylastparadigm wrote: »

the way i look at it, if you have 200 (made up number) shops that all set their prices to compete with each other and everyone else, then you have a more true free market. if you have 200 shops with all the same prices, you have reduced competition.

by my poor understanding of economics, that makes sense to me. surely if you have more shops competing for my dollar, ill get a better deal?

as an aside the definition of a cartel: An association of manufacturers or suppliers that maintains prices at a high level and restricts competition.
im not accusing anyone of anything really, but is central pricing for huge numbers of shops like having a cartel?

If each shop set it's own prices, then yeah competition might lead to cheaper games. But you also have to consider who supplies Gamestop with games. Gamestop has significantly more bargaining power, when buying games from this company, than an individual shop would; they buy in bulk, they have loads of shops, they have nationwide marketing etc. So there's a benefit in terms of prices of having a large company bargaining with suppliers. Walkmart would be a good example of this. And there's also the fact that Gamestop as a whole is competing with other games supplers; they don't have a monopoly on the games market; this would keep prices in check too.

It's not a cartel, because a cartel consists of collaboration between several different companies in the same market, such that prices in that market are kept at a high level. By definition, a single company can't be a cartel, and there's no evidence that game suppliers in Ireland are collaborating to keep prices high; if they were, I assume game prices would be significantly higher here than other countries, which i don't think they are (?)

mylastparadigm

andrew wrote: »

If each shop set it's own prices, then yeah competition might lead to cheaper games. But you also have to consider who supplies Gamestop with games. Gamestop has significantly more bargaining power, when buying games from this company, than an individual shop would; they buy in bulk, they have loads of shops, they have nationwide marketing etc. So there's a benefit in terms of prices of having a large company bargaining with suppliers. Walkmart would be a good example of this. And there's also the fact that Gamestop as a whole is competing with other games supplers; they don't have a monopoly on the games market; this would keep prices in check too.

It's not a cartel, because a cartel consists of collaboration between several different companies in the same market, such that prices in that market are kept at a high level. By definition, a single company can't be a cartel, and there's no evidence that game suppliers in Ireland are collaborating to keep prices high; if they were, I assume game prices would be significantly higher here than other countries, which i don't think they are (?)

you are saying a lot of sensible things. in fairness.

but i dont see the link between purchasing power at supplier level and end price at consumer level. even if they were at local competitive prices, what difference would it make? they would sell more copies, idealy enough to compensate for the lower price and be able to buy in bigger bulk.

i didnt actually say it was a cartel. but it is like it though. from a competition point of view, it does stifle competition. (i think anyway).

andrew

mylastparadigm wrote: »

you are saying a lot of sensible things. in fairness.

but i dont see the link between purchasing power at supplier level and end price at consumer level. even if they were at local competitive prices, what difference would it make? they would sell more copies, idealy enough to compensate for the lower price and be able to buy in bigger bulk.

What I mean is, say you're a small shop. You want to buy Xbox games from Microsoft (I don't know who actually supplies games to shops). A chain like gamestop can say 'hey Microsoft, we're going to buy an absolutely massive number of games from you, cut us a deal.' Microsoft then sells them games at a few euro less per unit than it normally would, and gamestop can charge less for their games and still make a profit.

In contrast, a small shop can't really make that kind of bargain. It has to buy games from Microsoft at full price, and so must charge a higher price than gamestop in order to make the same profit on each game. Or, it can sell at the same price as gamestop but make a much lower profit per game. It probably can't sell cheaper than gamestop though, given it's games were more expensive, and it doesn't have the kind of economies of scale as gamestop does. And that idea, generally applied, is why Tesco is cheaper (usually) than your local shop, and why chains in general tend to push out local businesses. They have power when it comes to their suppliers, and so can make a profit while also making things cheaper.

i didnt actually say it was a cartel. but it is like it though. from a competition point of view, it does stifle competition. (i think anyway).

I see what you mean; it's an interesting way to look at large chain stores. But i suppose it only stifles competition if you assume that the 200 games shops which exist due to gamestop, would exist as independent shops if gamestop didn't exist, which they might not.