this post was submitted on 25 Mar 2024
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If all the sellers of vacuum cleaners decide to have high prices, people can just choose not to buy vacuums. If all the electricity providers or food providers in an area decide to raise prices, people in that area are still forced to buy it.
I believe capitalism doesn't work without the option of not buying it at all. In markets with few options and that you cannot choose not to buy it, sellers can all collectively jack up prices.
Here's an FTC report saying that they found that large food retailers used the supply chain issues to make deals with suppliers to supply them over smaller grocery stores. This harmed small local groceries. The report also says they found reason to further investigate the large grocery chains taking advantage of this lack of supply to local groceries to increase prices for customers by more than the increase in input cost. They were able to price gouge because only 8 firms control over half of grocery sales and people can't choose not to get groceries.
Electricity providers are a special case because they are a (government-enforced) monopoly.
Water providers have an incentive not to follow the other ones when they raise prices, because they can make more profit, when others raise their prices, by raising their own less so, or not at all, than they would make by raising their prices to match the competition’s prices.
If one starts charging $10/gallon while the others stay at $1/gallon, he loses all his business. That’s called an “incentive structure” and while it doesn’t force them to keep low prices the same way a gun to their head would, but it does do so effectively, by making that the optimum path to profit.
As it turns out, people are motivated to make more money, which is why markets work at all.
Yes what you said is true: IF everyone starts charging more for water, then people must pay more.
The reason that statement doesn’t matter is that the IF condition is never true in a free market. That’s exactly what free markets provide: the incentive structure from competitive pricing that regulates prices and keep price fixing from happening.