Glamor Economics

Chapter 72

Chapter 10 Section 6 Why the agreement becomes a dead letter——price alliance

In La Fontaine's fable "League of Rats", there is a mouse master who claims to be "neither afraid of male cats nor female cats, nor afraid of teeth biting nor claw scratching".Under its leadership, the mice signed an agreement and formed an alliance against the old cat to save a little mouse.As a result, facing the old cat, "the mice didn't dare to make any more noise, they all ran away and hid in the hole to save their lives. Anyone who doesn't know what's going on, beware of the old tomcat."The Rat League collapsed like this, and the agreement became a dead letter.

In the fable, the reason why it is difficult to form a mouse alliance is the incomparable power of cats; the reason why it is difficult to realize a price alliance is the irresistible force of market supply and demand.In a market economy, the most basic factor that determines prices is the relationship between supply and demand.If supply is less than demand, prices will rise; if supply exceeds demand, prices will fall. No force can resist this.In an imperfectly competitive market (monopolistic competition, oligopoly, monopoly), companies can only affect prices by controlling supply, and it is impossible to impose their own rigidly determined prices on the market.In oligopoly markets such as automobiles and civil aviation, each enterprise can only consider its own short-term interests, not the long-term interests of the entire industry. Therefore, when the supply of the entire industry exceeds demand, do not expect each enterprise to reduce output to maintain a certain price.

All kinds of alliances among domestic enterprises can be heard endlessly, with repeated defeats and repeated defeats, many enterprises enjoy it.Enterprises engage in alliances in order to seek a life buoy in the ocean of the market, but the result is not.The fact that each alliance failed shows that this kind of price alliance, which is regarded as a magic weapon for success by many enterprises, is unreliable.

my country's current economic era seems to have become an era of alliances. Driven by various common interests, some companies often carry the banner of alliances, either raising prices and lowering prices, or limiting production to protect prices, or uniting to make a common external.After careful analysis, these forms of enterprise alliances can be roughly divided into two modes: one is a loose alliance voluntarily established between enterprises; the other is an alliance led by the competent department and participated by enterprises.

The obvious features of price alliance are: it is a joint action voluntarily taken by two or more operators; it is a joint action between competitors at the same management level or links; The content of the agreement is to fix or limit the price; their common purpose is to obtain high profits by restricting competition.

Since the industry association sets an industry self-regulatory price, it has no mandatory effect, and it is impossible for the industry association to punish merchants who violate the self-regulatory price. Therefore, this self-regulatory price is actually just an empty shelf and has no practical significance.In the face of interests, it is conceivable how much binding force this "oath" based on industry pressure and business ethics has.

As early as the beginning of the 18th century, Adam?Smith said: "Men of the same trade seldom meet together, even for amusement and amusement, but their conversation concocts either a conspiracy against the public, or a scheme of raising prices. "Facts have repeatedly proved that this non-oligopoly alliance lacks an effective restraint mechanism and is quite uncertain.

A price alliance is called a "cartel", and once any price cartel is formed, it will inevitably go to its opposite.Once the alliance is formed, the price is very flexible, as long as one of the members lowers the price, it will definitely benefit from it.In pursuit of interests, price competition among alliance members is inevitable, which will inevitably lead to the disintegration of the cartel mechanism.

Even if the price alliance achieves certain results in the short term and relieves the urgent needs of the alliance enterprises, its potential and long-term harm cannot be ignored.First of all, it restricts the competition of enterprises.Free competition is the basic attribute of a market economy. Without competition, the market will become a stagnant pool.Different companies have different operating costs, but implement the same price, forming a situation where everyone divides up the market share evenly, which virtually protects the backwardness, encourages not to make progress, and seriously dampens the enthusiasm of the company's development.Secondly, it damages consumers' right to know and choice, harms consumers' interests, and is not conducive to cultivating consumers' mature consumption concepts.As the saying goes, there will be no mature market without mature consumers. Therefore, the final result will affect the long-term development of the entire industry.

[links to related words]

Price alliance refers to the monopoly alliance implemented by two or more operators with competitive relationship to agree on the price of goods or services through contracts, agreements or other means to limit market competition and obtain excess profits.

(End of this chapter)