On Thursday, November 13, 2014 2:01:06 PM UTC-5, SMS wrote:
On 11/11/2014 1:17 PM, trader_4 wrote:
On Tuesday, November 11, 2014 2:15:31 PM UTC-5, 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.
Economics 101 says you're wrong.
But Marketing 432 says that I'm right.
Read this book: http://www.amazon.com/dp/0387769994 and you will gain
an understanding of how prices are set.
Look, you've made all kinds of extraordinary claims here, without a shred
of proof. You've claimed that all tire manufacturers recommend nitrogen.
I quickly provided you with a link and reference to what Michelin says
about nitrogen. And they clearly aren't endorsing it. Their position is
closer to "use it if you want". You claimed nitrogen leads to less warranty
claims, less customer returns, again with no proof at all. In reality, the
only test data I've seen was at Consumer Reports, where they purged tires,
left them filled with N for a year and wound up with about 1 PSI difference.
How that translates to any of the wild claims, IDK.
As to how pricing is set in free markets, you don't know what you're talking
about. I know perfectly well how businesses set prices. They set them
based on maximizing profits and no book is going to change that. From the
fact that they don't directly set the selling price just based on their
costs, you incorrectly conclude that the cost has no effect. It does. It
affects the demand curve for the product. Apparently there are people like
you who believe nitrogen is a very important item. Therefore, economics 101
tells us that those people are willing to pay more for tires that are mounted
with them. That creates a different demand curve for tires with nitrogen as
opposed to tires without. Many people who pay X for a tire with regular air
will pay X+ for a tire with nitrogen. That leads to higher prices.
Now, as I've said before, neither you nor I know for sure how Costco sets it's
tire prices. It could be that they throw a dart at a board. It could be that
they lose money on every tire sold and don't give a damn. But economics
is a science and the expected result in a free market when you increase the
cost of production is higher prices. Prices go up to maintain the same margins.