On Tuesday, November 11, 2014 5:41:26 PM UTC-5, wrote:
On Tue, 11 Nov 2014 11:15:27 -0800, SMS
wrote:

On 11/10/2014 9:14 AM, wrote:

For years, Toyota lost money on every Hilux sold in North America, but
they sold them for what they could get for them to allow them to
import more Celicas, Coronas, and Corollas - models they could sell
all they could get and more.

The same has happened with virtually every other manufacturer/dealer
at one point or another.

Yep. Prices are usually set at "what you can get" not your cost plus
some fixed mark-up. There are some exceptions, but not many. A _LOT_ of
people don't understand this, not just djb. Now it is true that some
companies drop products if they are losing money on them and there is no
other reason to keep the product line (but often there are reasons that
make sense).

Costco prices would be no lower if they did not provide nitrogen. It's
just not they way retail works.
The only way Costco's regular prices would be lower is if someone
else was selling the same tire for less and they didn't want to loose
market share. If they can sell 100 at a dollar profit they make more
than selling 48 at 2 dollars profit

That's part of it. The other part is that an important part of where
supply and demand curves meet for a product are the total cost of
production. Nitrogen costs money. Unless you believe that it actually
saves the tire company money, by less warranty claims, less customers
coming back, etc, which I don't. If you add cost to a product, then
economics 101 says that the result is a higher market equilibrium price.

That's the economics behind it. What Costco actually does, none of us
know. They management could set the price based on astrology. But SMS
keeps insisting that costs have nothing do to with it. That's just not
true. Costs directly affect prices. It doesn't have to be that Costco
figues their cost and adds X%. Per the above, market forces determine the
price, but costs are directly involved in what the price is. Also, IDK
about Costco, but typically businesses know their costs, keep and eye
on their margins, etc. I would be surprised if Costco didn't know to
the penny how much their cost is to install a tire, including the nitrogen
and they keep that in mind when setting the price.