This is indeed an important question. You could say that it's done through
the mysticism of brand identity, which price-cutting would undermine. But
what about more commodified industrial goods like cars and appliances. Why
is the cost-cutting from production in Mexico not translating into lower
prices? Surely durable goods prices are increasing less rapidly than the
prices of nondurables, but the profit recovery of US auto companies
suggests that the markup has increased. How can this be with lots of slack
in the macroeconomy and an apparent intensification of competition around
the globe? How too did banks keep the spread between loan and deposit
interest rates high during the recent, and now apparently fading, period
of low interest rates?
Doug
Doug Henwood [[EMAIL PROTECTED]]
Left Business Observer
212-874-4020 (voice)
212-874-3137 (fax)
On Fri, 25 Feb 1994 [EMAIL PROTECTED] wrote:
> Michael Perelman's recent postings on Nike in the world economy have
> been as fascinating as they are revolting. One question that is bound
> to pop into the mind of anyone trained in economics in this country is
> how sales prices are holding up in what seems to be a rather competitive
> industry. In other words, what prevents one of these firms from gaining
> huge market share by cutting prices in half (at a higher volume they
> could still afford to pay Michael Jordan!). It seems to me that the
> answer to this question is a very important part of the story. <Tom W>
