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79 sats \ 17 replies \ @TNStacker 19 Aug \ on: Grocery Store Price Gouging? econ
How about producers/distributors, especially meat and poultry?
As far as them running up margins?
I saw Lyn Alden post those data on nostr yesterday. The margins throughout the food supply chain are very thin.
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Here's the issue with that perspective. IF the producers / distributors for meat and poultry were "gouging" the only way that would work in a free market would be if they had a cartel or monopoly.
Funny think about that. That is a massive problem in the US. Most of the meat is controlled by a few companies. The solution isn't to invoke price controls because that wouldn't fix the deeper issue. Cartels.
Texas Slim at the Beef Initiative has been talking about the problem of meat centralization for a long time. The FDA is a massive reason for this. Its the same old story we hear over an over. Government regulatory agency makes it harder for upstarts to enter a market. Existing entities support politicians that increase regulation creating a regulatory moat.
The good news is that there are meat producers fighting back. Trying to build new circular economies. Selling direct and cutting out these multi-national meat distributors.
The other thing I've heard is that most of the meat we see in grocery stores comes from outside the US. The US meat is exported because it can bring higher profits outside the US.
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Are four producers few enough for a cartel?
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Not sure the number matters that much.
At least based on Wikipedia's blerb on it. And this aligns with what I think of with a cartel.
A cartel is a group of independent market participants who collude with each other as well as agreeing not to compete with each other in order to improve their profits and dominate the market. A cartel is an organization formed by producers to limit competition and increase prices by creating artificial shortages through low production quotas, stockpiling, and marketing quotas.
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my point is less competition leads to collaboration, whether or not a formal cartel is formed. A natural, informal organization forms due to game theory.
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I've done some work on related topics. While it's certainly true that concentration is increasing throughout the ag sector, the general view seems to be that there is not much evidence to support monopoly pricing.
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How would the general view know? In most collusion cases we find out after someone blows a whistle or takes an offer in a case.
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This is from people studying the price trends of outputs compared to those of inputs. If some sort of oligopolistic pricing is happening you'd expect to observe price trends of outputs change as concentration increases.
I'm not vouching for their methods or conclusions. That's just some context that I happen to have access to.
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this is what I'm trying to say, I think.
A better question to ask is how would someone corner that market? How can you as a meat producer, lock out competition when companies like McDonalds, Costco, Walmart, who compete with each other, definitely have the resources to compete directly with you if they feel they're not getting a fair price? Someone is going to sell them the inputs they need to put you out of business.
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Four producers control beef in the US.
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And two companies control smartphones. So what? Show me how they prevent new entrants. Show me what's stopping the companies I listed from starting their own operations.
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The conpanies you listed all exert their own monopoly powers. Ask anyone supplying those companies about what extra capital they need to raise to meet the company's requirements. Walmart makes you buy into their RFID system. That is called a barrier to entry.
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Walmart is also thought to engage in monopsony, which is requiring sellers to sell to them at disadvantageous prices.
I’m skeptical of that claim, but it would offset collusive pricing from suppliers.
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you provide examples that prove my point. you just don't know it. You seem happy to pay more and more for marginally better products from fewer suppliers.
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No, I'm not happy to pay more. I'm just happy to take claims of price fixing with a large grain of salt because the solution is usually involving the authorities, and they're always for sale. It just hurts competition even more. Try actually freeing the market for once.
If the government wasn't taking such a large chunk out of the economy and just getting in the way of just about everything, you'd see a lot more entrants in every industry. The most heavily regulated ones are usually the least competitive (not the only anti-competitive ones - e.g. smartphones, event ticketing, etc.). The regs are typically written in favor of the incumbents.
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Did breaking up Standard Oil or Ma Bell harm competition?
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