price competitiveness remains important to the economy!what are the arguments against this!!?

Question

Please anyone any links or suggestions??much appreciated

Answer 1

Price competitiveness can be used by larger companies to crush smaller ones. This is the suggestion with supermarkets - that they drive smaller companies out and then put up prices to recover their losses.

There can also be collusion between companies that creates a cartel. This means that there is an agreement between companies that the price should not fall below a certain level. This was the case with the "recommended retail price" a few years ago. Even when there is no formal collusion, it is always possible to have a gentleman's agreement between companies to achieve the same.

Price competitiveness can also cost a lot, as advertising and promotion can be expensive. If the product is unique, there is no need to spend a lot on this, but competition in this case costs money to the consumers.

Lastly, there is the drug company argument which says that if a "correct" price is not paid for drugs, then there can be no research for further ones. All drug companies use the same reasoning and the price of drugs is therefore quite high.

Answer 2

There is no argument against this .. both in the goods and labour market it is the only system that has been proven to work over the long term.

An alternative system of pricing was tried by the (former) Soviet Union, and to some extent by China ...

Countries that try to directly control prices (eg Zimbabwe) destroy their economy and eventually collapse into choas.