Comment by nnevod
6 hours ago
>That's constrained by the Law of Supply and Demand.
Law of supply and demand works in the really free market, when providers are essentially infinitesimal and are not able to exert their will upon consumers. If a single provider is capable of significantly affecting the prices and supply of the whole market, it can bend law of supply and demand.
>Standard Oil gained great profits by reducing the price of kerosene by 70%. They (I suppose, don't know for sure) had plenty of margin for that, and as price-demand relation is not linear, increase of volume was larger than margin reduction. That is often not the case, and race to (quality) bottom and shrinkflation happens.
Standard Oil made more money by lowering the price. They had margin to do that by being very good at lowering costs.
> race to (quality) bottom
When people aren't willing to pay for quality, there's no point in increasing the costs for more quality.