[HN Gopher] As inflation soars, how is Arizona iced tea still 99...
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As inflation soars, how is Arizona iced tea still 99 cents?
Author : sharkweek
Score : 123 points
Date : 2022-04-14 06:16 UTC (16 hours ago)
(HTM) web link (www.latimes.com)
(TXT) w3m dump (www.latimes.com)
| nakmachine wrote:
| Looking through the comments I'm surprised at how many people it
| seems are still able to buy them for 99 cents. I haven't seen one
| sell for the actual can price in years. To the point that it was
| already a joke in 2016
| (https://www.youtube.com/watch?v=fMUZ2sVjLfY).
| janitor61 wrote:
| "Groceries are 8% higher than last year. Dollar stores: now
| dollar-and-a-quarter stores." - so, is it 8% or 25% ?
| edgyquant wrote:
| This may help you:
| https://en.wikipedia.org/wiki/Compound_interest
| Fatnino wrote:
| We need an 8 cent coin.
|
| Maybe put the faces of several recent/current presidents on it.
| LegitShady wrote:
| I think the dollarama around here is up to $4-5 now.
| RicoElectrico wrote:
| Kind of ironic that its price in Poland is crazy high.
| Overtonwindow wrote:
| Cost of aluminum and flavored water, it's not terribly expensive
| to produce.
| egberts1 wrote:
| Los Angeles Times should stick to reporting on their area's
| inflation.
|
| It's 2.25 for a tall Arizona Ice Tea at 7-11, Malibu.
| JohnWhigham wrote:
| _"I don't want to do what the bread guys and the gas guys and
| everybody else are doing," Vultaggio said. "Consumers don't need
| another price increase from a guy like me."_
|
| Integrity like this is rare in the American business landscape.
| His successor most likely won't feel this way though.
| brk wrote:
| IMO it is more Marketing than Integrity. I would be surprised
| if this article was completely organic, most likely their PR
| department reached out to journalists to do a story on how
| great this CEO/company is.
|
| Not saying he is not due his earnings for the product, but if
| his concern was fair pricing to consumers the product would
| likely be about 20 cents, maybe even less.
|
| Also, as the article notes, the company sells more than just
| these 99 cent cans, and they have not held all prices constant.
|
| It's a nice feel-good piece, but this guy and his sons are not
| worth $4B because they are looking out for the best interests
| of their customers above all else.
| etempleton wrote:
| In college I would buy a can of Arizona Iced tea at the local
| drugstore and then walk over to the McDonalds and buy two
| Cheeseburgers for a dollar each. You can still-almost-do this
| over a decade later (a cheeseburger is usually over a dollar
| depending on the state).
| [deleted]
| colpabar wrote:
| You may actually be able to get _more_ mcdonald 's with the
| same amount of money now. Their app has all these deals like
| "free cheeseburger on orders of $1 or more", meaning if you
| spend $1, you get a free cheeseburger. I guess that requires a
| smart phone which isn't free, and of course the app will be
| taking as much data as it can access. But if you enjoy
| mcdonald's food, it seems to be cheaper than ever.
| stonogo wrote:
| In the early 2000s McDonald's hamburgers were 39 cents on
| Wednesdays. I would never have survived grad school without
| it!
| layer8 wrote:
| That seems like a pretty extreme form of intermittent
| fasting. ;)
| Zircom wrote:
| He probably bought a lot on Wednesday and stuck them in
| the fridge/freezer for the rest of the week
| [deleted]
| gigaflop wrote:
| So long as calories-per-week average out, it'll be fine,
| right? It's just averaged CICO?
| bluedino wrote:
| They were always 35 cents at Hot N Now
| krsrhe wrote:
| hedora wrote:
| You can still buy the 20 piece chicken nuggets. They cost
| less than the five piece package (so the cost of nuggets 6-20
| is actually negative).
| kingcharles wrote:
| The app is crazy. This last week I've been getting two-for-
| one on sandwiches. If you pick McDouble you can get two of
| them for $2.19 total (+tax depending on jurisdiction). The
| large fries are always $0.99 on the app. Plus you get points
| from it which converts into more free stuff.
|
| And if you're super friendly with the little old Mexican lady
| who works there, she'll sneak free pies into your bag too.
| scruple wrote:
| I was recently looking at a McDonald's drive-thru menu for
| the first time in probably a decade (road trip, forgot to
| pack a bite to eat). A Big Mac meal was $11. A large french
| fry was $4.99. It shocked me a little bit.
|
| I've been scratching my head for the last day and a half
| wondering how the McDonald's drive-thru near me is always
| packed. Your comment is illuminating to me because I didn't
| know that I needed a McApp to get McDonald's prices, though I
| am not at all surprised.
| bluedino wrote:
| At lunch time you can get a curbside to go burger and fries
| from Applebees for $9
| alach11 wrote:
| Can you say where you were seeing those prices? That's
| wildly different from what I see in my metro area. At my
| local McDonalds a Big Mac meal is $6, not $11.
| brimble wrote:
| They've switched to an interesting (though, to me, annoying
| and I hope it doesn't catch on but it kinda already has
| [other fast food places are doing it too] so add it to the
| list of shit that's terrible about the current world) model
| where they price really high on the menu but then offer
| deals and coupons that get you back down to what would have
| been a sale price before the price hikes.
|
| It's a kind of price discrimination tactic--people willing
| to clip coupons or use the company's app might pay 1/3 or
| less the menu price, and those who aren't, pay the full
| (and crazy-high) menu price.
|
| Like, yes, coupon shopping has always been a thing, but not
| like this, because the normal menu prices used to already
| be pretty good. They're super expensive now, but if you
| burn some time, they'll give you a _really_ good price,
| consistently, pretty much any time you want it.
| imajoredinecon wrote:
| The combination of high and very low prices also stuck
| out to me. I agree it's interesting, but I personally
| don't mind it. It's not a bad progressive model to have
| people who aren't price-sensitive subsidize people who
| are.
| brimble wrote:
| I dislike trends toward finding a way to make you pay as
| much as possible for your own time & attention, is the
| reason it bugs me.
|
| [EDIT] More generally, I just prefer my commerce to be
| fairly straightforward. I don't like having to second-
| guess whether there are hidden tricks going on to screw
| me.
| etempleton wrote:
| I was shocked recently by the price of the value meals as
| well, which has skyrocketed into full meal at restaurant
| prices.
|
| The trick to McDonalds has, for a long time, been that the
| value meals are any thing but a value and to buy
| exclusively from the dollar menu. If you do that you will
| be hard pressed to find anything cheaper.
| gigaflop wrote:
| I keep multiple food delivery apps on my phone, despite
| having the $MEMBERSHIP_NAME for one via my credit card(fees
| on card are cheaper than the membership itself).
|
| This 'pays off', in that I have my default choice, and can
| choose to use any of the other apps when there's some
| combination of coupons and deals to be had that make it feel
| worth it.
|
| Yesterday, I used a "$15 off $22" coupon(for some reason,
| they gave me two, and I plan to use the other this weekend),
| combined with two bogo deals from an instance of a small
| chain restaurant, and paid $20 delivered(fair tip included)
| for what would have been at least $30 had I driven over and
| ordered in person, since both deals were only available on
| the app. As a bachelor, it's enough food to count as dinner
| for at least 2 days in a row.
|
| I don't know how $COUPON_GIVING_APP can make money while
| footing that kind of coupon deal, but hey, I'd be dumb to not
| make use of it if I was already looking to spend some money.
|
| There was also a promotion only on $COUPON_GIVING_APP from
| Wendy's for a free sandwich of theirs, so long as cart
| subtotal was at least $15. The discounted sandwich counted
| towards that, and I ended up feeling very fat and happy with
| a price of $12 delivered.
| ja27 wrote:
| App / coupons are a decent way to have a little elasticity on
| price and maximize revenue from people that will pay more and
| still appeal to a bargain-hunter. At least here there is
| always a 20% off the total order deal available in the app so
| that's an immediate discount for a relatively small effort.
|
| Locally they did recently drop their long-time $1 any-size
| soft drink but it seems to be back now after a few weeks.
| Workaccount2 wrote:
| I can often get food cheaper from McDonalds than if I had
| made the equivalent from base ingredients at my house.
| OJFord wrote:
| I'm sure I'd rather eat at yours though!
| RcouF1uZ4gsC wrote:
| One place where you can get a lot of food cheaply is Costco.
|
| You can get a hot dog and drink for $1.50 and a whole
| rotisserie chicken for $5.
| Jamie9912 wrote:
| Maybe they will start selling it as a loss? Gets people through
| the door
| Digory wrote:
| The gas stations that sell this stuff need margin. Gas is
| closer to a loss-leader/break even for most.
| gigaflop wrote:
| Having worked at a gas station, most of the money comes from
| snack and drink sales indoors. Gas itself netted <$0.05 per
| gallon, I think.
| Digory wrote:
| Right. Almost no way Arizona could convince them to sell
| tea as a loss leader (if that's even legal).
| mdasen wrote:
| Prices are sticky and they're betting that their costs will come
| back down in the future. They don't want to hike prices, ruin
| their brand and market positioning, just to see things like
| aluminum prices come back to normal in 6 months and for customers
| to have moved on.
|
| While other drinks may have hiked prices over the years, I
| haven't noticed spikes in the price of other soft-drinks over the
| past few months. Their costs are rising too. I think most
| companies don't want to alienate their fans over what they're
| hoping will be transitory cost increases. If Coke hikes prices
| and people start trying Pepsi, will they come back? If Arizona
| hikes prices, do they lose the "just a buck" cliff that makes
| them seem a lot cheaper than anything more than a dollar? Does
| $1.50 look a lot closer to $2.50 than $1 does to $2? Do people
| buy a $1.79 Snapple or $1.99 Gold Leaf if Arizona is $1.29 (even
| if it is still both cheaper and larger)?
|
| Given that they're a private company and the owners are multi-
| billionaires, it seems reasonably wise to eat some margin over
| the short-term. It's not like they're struggling and it's not
| like they have lots of shareholders to appease on a quarter-by-
| quarter basis. I don't think people expect the cost of aluminum
| to stay at double long-term and if the Ukraine/Russia war ends,
| it seems like fuel prices will likely ease (and long-term it
| seems likely that Europe now has very strong incentive to reduce
| its dependence on Russian fuel). If costs remain high, they can
| re-evaluate this decision in 6-18 months while potentially
| missing out on a small amount of profits.
|
| $43M in increased aluminum costs over a year doesn't seem that
| much compared to a $4B net worth - especially if you're still
| making money, just $43M less. If I were them, I'd weigh it out:
| raise prices and potentially damage the brand long-term and risk
| a good bit of what the family has built over decades; or keep
| prices steady, potentially lose out on profits that would make us
| 1-2% richer, and still be able to re-evaluate this decision in a
| year. If I had $4B, I'd much rather keep consumer sentiment
| thinking that I'm the small quirky outsider offering them great
| value.
| gruez wrote:
| >I haven't noticed spikes in the price of other soft-drinks
| over the past few months. Their costs are rising too
|
| I haven't noticed any "spikes" in soft drink prices, but I have
| noticed that sale prices have edged up around 15%. This is for
| name brand drinks, multi-packs, sold in grocery stores. I don't
| pay attention to regular prices so I don't know whether it's
| limited to just sale prices or to regular prices as well.
| Supermancho wrote:
| > I haven't noticed any "spikes" in soft drink prices,
|
| From fountain soda to 2-liter there have been spikes.
|
| https://fred.stlouisfed.org/series/APU0000FN1101
|
| Walmart: https://www.walmart.com/ip/Pepsi-Cola-Soda-
| Pop-2-Liter-Bottl... (1.98)
|
| The midwest happens to have a couple gas-station quickmarts
| that have deals like pay $7/month for a free (any size) soda
| or coffee per day that many people take advantage of, but in
| the supermarket the price changes are evident.
|
| The real spikes have been in restaraunt/fast food drinks.
| It's not uncommon to see over $2.75 for a relatively modest
| drink cup. This has been primarily a tactic for low-margin
| food businesses to avoid raising their consistently low
| prices, in comparison to their competition.
|
| Ironically, this has led some market losers (like Burger
| King) to leap ahead of competition (Carl's Jr/Hardees) as
| they had to raise prices to survive, leading to incidentally
| higher quality meals. ie Compare the mc-donalds cardboard
| quality Carl's Jr famous star to a Burger King burger today.
|
| But that's just my observation.
| gruez wrote:
| > > I haven't noticed any "spikes" in soft drink prices,
|
| >From fountain soda to 2-liter there have been spikes.
|
| >https://fred.stlouisfed.org/series/APU0000FN1101
|
| I'm not sure what your point is. I explicitly mentioned
| experiencing a 15% rise later in the same sentence. That's
| pretty much exactly in line with pre-pandemic prices in the
| chart you linked.
|
| Also, on a purely subjective basis, the chart you linked
| doesn't show any "spikes" to me. There's a modest rise in
| early 2022, but it's roughly in line with pre-pandemic
| price rises.
| Blackstone4 wrote:
| Becaused it is sugar and water!?!?
| antattack wrote:
| Their margins are sky high! Cost of water is less than 1c, flavor
| probably another 1c.
| hoppyhoppy2 wrote:
| The aluminum can or plastic bottle, too, though that's still
| not the most expensive part. Unless you're driving to the
| Arizona bottling plant to buy it, there are warehouses and
| trucking companies and retailers involved who also have to
| cover their costs of operation and turn a profit.
| izzydata wrote:
| Their margins must have been very high to begin with. Your
| margins decreasing from 700% to 680% probably doesn't matter too
| much as long as you aren't strapped with corporate debt from
| trying to expand relentlessly year over year.
| ilamont wrote:
| One of the primary target markets appears to be tweens and
| teenagers, judging by the soft drink buying patterns of my kids
| and their friends. 99 cents means a lot to them (still).
|
| This brand offers frequent discounts ... I've seen them
| discounted to 75 cents at the local CVS, but that was during the
| early part of COVID when sales tanked.
| racl101 wrote:
| Usually food that doesn't change is not affected by price changes
| tends to be some of the worst and unhealthiest.
|
| Arizona iced tea being a prime example. They should just call it
| diabetes in a can.
|
| Others are the Mickey D's cheese burger or the taco bell tacos.
|
| It's so tasty and addictive but so bad for you. I'm not surprised
| it still costs the same.
| ortusdux wrote:
| The stores near me are phasing Arizona products out for higher
| priced competitors. I'm assuming they make a better profit off of
| identically sized $1.99 cans of Monster green tea.
| slackfan wrote:
| It's 1.29 now.
| bluedino wrote:
| They're still 50 cents a lot of the time at Walgreen's. Not
| quite that low, but I bought 3 for $2 today.
| joecool1029 wrote:
| Not in the US, the tiktok was of a can priced in canadian peso:
| https://twitter.com/DrinkAriZona/status/1351916465889406976
| bfgoodrich wrote:
| magneticnorth wrote:
| The article is from 2 days ago, and Arizona's tweet about it
| seems to confirm they're still $.99 in the US
| https://twitter.com/DrinkAriZona/status/1513958532328030208
|
| I think in Canada they're $1.29 now, though.
| dwringer wrote:
| I haven't seen one priced at 99 cents for a couple of years
| now. The best price in convenience stores where I live (US)
| is typically 2/$3.00. The cans don't even say 99 cents
| anymore, they seemed to start phasing that out after that
| episode of Atlanta someone else linked.
| adampk wrote:
| If you report the store Arizona will tell the store to sell
| at .99$ or they will stop supplying the store.
| throwaway48375 wrote:
| https://drinkarizona.zendesk.com/hc/en-
| us/articles/150000325...
| kylehotchkiss wrote:
| Last time I got a 99 cent arizona tea, there was some slimy
| chunks at the bottom. Maybe mold? That's probably why
| mywittyname wrote:
| I've been drinking Arizona tea since the 90s. Something they
| aren't saying they do, but I'm certain they are, is watering down
| the product. It's the beverage equivalent of shrinkflation. Their
| green tea in particular lacks flavor.
|
| I kind of wish they would bite the bullet and make a can $1.99
| and bring back the full flavor 90s version.
| zardo wrote:
| Taste sensitivity tends to decrease with age. It could be the
| exact same beverage, and taste different to you because you're
| 30 years older.
| rhino369 wrote:
| They might also have found that people just want sugar water.
| A lot of mass market food products get bastardized by being
| made blander and more sugary.
| brimble wrote:
| Noodles & Company did the restaurant version of this a few
| years (... 5ish? 6?) ago. Went from a sensible serving of
| good and healthy-ish (for a "fast casual" chain restaurant)
| food for a surprisingly reasonable price, to a heaping
| mountain of bad food at roughly the same price. I assume
| some MBA ran some numbers and decided ruining it would make
| more money.
| flatiron wrote:
| In high school in the 90s I worked at a place that hired
| lifeguards and then staffed things like condo and hotel pools
| etc so they didn't have to. Sometimes we would get stuff like
| birthday parties and such.
|
| I was a lifeguard at a party for the ceo of Arizona iced tea.
| Never seen a house like that. Crazy how much money you can make
| selling sugar and water. From that experience they aren't
| lacking.
| cnasc wrote:
| I'm pretty sure we grew up in the same town
| gigaflop wrote:
| Add enough sugar to a flavored drink, and some American[0] is
| going to say they love it. Make it cheap, and they'll keep
| coming back for it.
|
| [0]No ill will, just an observation and generalization.
| nonamenoslogan wrote:
| I miss the cobalt-blue bottle of ginseng green tea they used to
| have for $1.19.
| hn_throwaway_99 wrote:
| I find this very difficult to believe. The actual _tea_ that is
| in an Arizona iced tea I 'm guessing maybe costs ~5c or so, if
| that? Surely the packaging, water, sugar, transportation and
| storage costs are the vast, vast majority of the cost.
| bombcar wrote:
| Once you realize that Arizona Ice Tea is basically just a
| taller can with water in it when compared to a can of pop, it
| makes more sense how it can still be $.99.
|
| The main additional costs are a bit more aluminum and some
| more water, everything else is comparable.
|
| And the 99 cents is really tied to their brand; if they break
| it they get hurt more, so they'll push it as long as they
| "can" - likely introducing a smaller or larger can at some
| point.
| thaumasiotes wrote:
| > And the 99 cents is really tied to their brand; if they
| break it they get hurt more, so they'll push it as long as
| they "can" - likely introducing a smaller or larger can at
| some point.
|
| Coca-Cola had a very similar issue way, way back in the
| day. I think they were pegged at 5 cents a bottle?
|
| That left them in the even more awkward position of being
| unable to raise the price without instantly doubling it.
| Spooky23 wrote:
| And... in 2 liter units Coke was still 5 cents for 8
| ounces a few years ago. Soda margins are _nuts_ and
| solely driven by demand.
|
| Their most profitable unit is the 20oz bottle that was $1
| in 1999 and $2+ today.
| conductr wrote:
| Because they know it's a convenience sized item. People
| wouldn't pay that amount in a grocery store. But soda
| prices have gone up a lot just since 2020. I find a 12
| pack of cans is and 2L is usually the most economical
| units and they've basically doubled for me.
| Spooky23 wrote:
| Agreed. Good thing for me, I have a diet Dr Pepper habit
| and paying beer prices for a can of soda increased my
| water consumption!
| conductr wrote:
| Right there with you, my DDP intake is flat out
| embarrassing but I've not really switched other than
| buying in bulk from the value chains and massively
| stocking up when I see a "good" deal.
| conductr wrote:
| This was mostly due to vending and coin amounts. It
| doesn't really constrain you in a digital payment
| reality. If this happened today they would move to 6c,
| then 7c, etc.
| bombcar wrote:
| Yeah, pricing is always inflexible near noticeable
| points, and I suspect a decent amount of the inflation
| we're seeing is those points breaking down, so prices
| surge past to a higher bar.
| mywittyname wrote:
| You find it hard to believe that a company would cut cost by
| reducing the amount of product they use?
|
| Tea, even if it is cheap, is still much more expensive than
| corn syrup and water. So if you want to cut costs, it makes
| sense to reduce the amount of tea and make up for it with
| more sugar.
|
| If you do it a little bit over 30 year years, few people with
| notice. You get a panel of taste testers compare the current
| version with a slightly watered down version and see if they
| can tell the difference. If most can't, you make the change
| and pocket the savings as profit. It's like making a copy of
| a copy on a copy machine, you can't tell much difference
| between the two, but repeating the process over multiple
| generations and the small differences adds up to be dramatic
| between the original and the 30th generation version.
|
| This exact situation happens for many food companies. They
| gradually reduce quality and costs over the years. And once
| the people who remembered the original product die off or
| forget, it can be hard to re-establish yourself as anything
| but a cheap brand.
|
| Five cents is a big cut of a $0.50 product.
| hn_throwaway_99 wrote:
| > You find it hard to believe that a company would cut cost
| by reducing the amount of product they use?
|
| No, my point is that if you want to cut costs, why would
| you focus on the cheapest (perhaps not in the overall
| sense, but in the total value of the product) ingredient
| that actually gives you the most "bang for the buck".
|
| I would imagine that slight packaging changes could provide
| much more savings without changing the taste of what
| actually goes in your mouth.
| wyre wrote:
| At 99 cents i would imagine packaging and distribution is
| as efficient as it can be. Making the recipe cheaper
| would be the only way to cut costs.
| JamesSwift wrote:
| Because its the easiest knob to turn by far to adjust
| costs? What is harder, to tell the machines to mix 5%
| more water in, or to modify packaging in ways that affect
| all upstream and downstream processes?
| krsrhe wrote:
| bitshiftfaced wrote:
| What's not as obvious is that the retailer is shouldering some of
| the burden of the margin cut. Unless they want to argue with
| customers, they have to sell it at 99 cents like it says on the
| can. So even though they'd rather sell it at a higher margin as
| they do with other cold drinks, they have to accept less in order
| to carry it at their store.
|
| The only real alternative is not to stock it (or only stock the
| plastic bottle ones that don't have the price on the labeling).
| But if they do that, their customers might shop elsewhere next
| time. I'm guessing that Arizona knows this, and they want to hold
| onto this "retailer shares the reduced margin" advantage for as
| long as they can.
| blamazon wrote:
| > unless they want to argue with customers
|
| "The price is on the can, though"
|
| https://youtu.be/hWObybWWGW4
| grumple wrote:
| I've been to shops selling Arizona cans for $1.99. I don't
| think it's uncommon.
| aidenn0 wrote:
| They can put a sticker over the price, which solves _some_ of
| the problem. Some people will still be jerks and peel the
| sticker off then argue.
| DavidPeiffer wrote:
| >Unless they want to argue with customers, they have to sell it
| at 99 cents like it says on the can.
|
| Thank goodness for a couple companies marking their product
| like they do. Back in college, if you lived on campus, you were
| required to get a few hundred dollars of what amounted to
| University Currency. USD -> University Currency (CyCash in the
| case of Iowa State) was 1:1, but CyCash expired at the end of
| the school year, could only be spent at vendors on campus, and
| only on food or items at the convenience stores.
|
| Cosmic Brownies were like $1.29 as marked on the box. A box of
| Oreos was around $7, with all other pre-packaged item being
| 100-200% of a normal retail price. I bought a lot of Cosmic
| Brownies for exactly that reason.
| RainaRelanah wrote:
| Ours just opened the boxes of little debbie products so they
| could sell individually one for the price of a box.
| paxys wrote:
| 99 cents for a can of soda is pretty standard, and ultimately
| that is what this is. The real question should be - how did they
| get away with overpricing it for so long.
| jedimastert wrote:
| A can of Arizona is about twice the volume of a normal can
| (680ml vs 355ml)
| asciimov wrote:
| 15 Years ago, a 20oz bottle of soda was a $1 and 12oz cans were
| 50C/. The decade before that 12oz cans floated between 25-35C/.
|
| So 15 years ago, the 23oz can was still a good value compared
| to the 20oz bottle of coke.
|
| > The real question should be - how did they get away with
| overpricing it for so long.
|
| Your question is framed wrong, it should be how have coke
| bottlers been able to keep the price so high. After
| transportation costs, the bottle, cap, and label are the most
| expensive parts of the thing (the can in Arizona's case). The
| liquid inside is stupid cheap.
| qiskit wrote:
| It's not rocket science is it? They are either dilute or they
| hedge against commodity/inflation.
|
| The cynic in me says this is just paid advertising for Arizona
| Iced Tea. Every time there is a hike in inflation, we get a story
| about the 99 cent iced tea. Or maybe they keep it at 99 cents for
| the free publicity.
|
| I guess one could take an arizona tea from today and find one
| from 5 years ago and send it to the lab for easy analysis. But
| I'm too lazy for that and so is the journalist apparently.
| russellbeattie wrote:
| I accidentally discovered how to make pretty great iced tea at
| home:
|
| 1) Boil water. Pour into cup with tea bag.
|
| 2) Walk away and totally forget all about the tea for a few
| hours.
|
| 3) Walk back into the kitchen for something else, realize you now
| have a glass of cold black liquid that is undrinkable.
|
| 4) Remove teabag and pour the black ooze into a liter container,
| fill with cold water and sugar to taste and maybe half a lemon
| from a nearby tree if you have one.
|
| Made the most smooth, delicious iced tea I've ever had.
| Borrible wrote:
| So, it was a highly overpriced hype brand back then?
| conductr wrote:
| Yes - if memory serves me 99c was actually a high price for a
| drink in the 90s convenience store setting; or maybe on par
| with a 20oz soda. They came in big cans to make it worth the
| cost.
| goosedragons wrote:
| The Canadian cans used to be 99 cents too. They also used to be
| bigger. I haven't seen the 680ml Arizona cans in a while. Now I
| think they are 473ml.
| __s wrote:
| In Canada:
| https://www.reddit.com/r/ontario/comments/u320hi/i_no_longer...
| dboreham wrote:
| This has been covered before in the context of how Coke was 5c
| for 75 years. I think there was a Planet Money episode on it.
| notriddle wrote:
| https://www.youtube.com/watch?v=Bcz0BJGEVUY
| rhino369 wrote:
| Some of that is just that inflation fundamentally changed when
| we floated the dollar in 1971. We now purposely try to inflate
| our currency 2% every year. Before then there was inflation and
| deflation, but not a single trend. A dollar in 1800 was worth
| essentially the same as it was in 1933--though there were long
| periods where it was less and long periods it was more.
| dboreham wrote:
| Interesting. Didn't know that. I'm more familiar with the UKP
| which only goes down in value :(
| nimbius wrote:
| I suspect the answer to this question lives deep in the supply
| chain in the form of sugar subsidies. Your taxes work to
| subsidize the production of overwhelming quantities of corn
| syrup. other flavours of iced tea like watermelon are sourced
| from GRAS (generally regarded as safe by the fda) aroma
| chemicals, similar to the ones in air fresheners. these are cheap
| to source and efficient to use.
| m3kw9 wrote:
| Increase water to tea ratio
| monetus wrote:
| In a can and still usually cheaper than bottled water.
| julianlam wrote:
| > AriZona has been committed to 99 cents since 1996, when it
| started printing the price directly on cans to stop retailers
| from raising prices on their own.
|
| At some point between 2010 and now, shops in my area (southern
| Ontario, Canada) basically ditched following this.
|
| I haven't paid $1.13 for a can of AriZona for years now...
| syshum wrote:
| 99Cents is US Pricing, from the story
|
| "when photos of its Canadian cans -- which sell for $1.29
| Canadian -- make the rounds online, people tend to freak. A
| tweet that said, "If this world is coming, I don't want to live
| in it," with a photo of a $1.29 Canadian can, went viral in
| 2021. The company had to take to Twitter to reassure its
| customers, explaining the concept of exchange rates. "Don't
| worry fam," the iced tea company wrote. "We still got you.""
| raspyberr wrote:
| I thought the whole thing with soft drinks is that they cost
| basically nothing to make but we're all used to paying 1000x
| their value.
| mawadev wrote:
| I like the statement and welcome it. Boundless expansion is
| pointless, isn't it? What I noticed is how package sizes go down,
| how ingredients change so it's taste is altered and so on... I
| just wonder how long we will keep doing that.
|
| What happens when you sell more package and less of the actual
| product, so people need 3 cans instead of 1 for the same effect,
| but you just produced 2-3x the trash?
| pvm3 wrote:
| MSRP is $0.99, however, retailers can set their own price [1].
|
| [1]: https://drinkarizona.zendesk.com/hc/en-
| us/articles/150000325...
| colinmhayes wrote:
| https://www.youtube.com/watch?v=fMUZ2sVjLfY
| Slow_Hand wrote:
| My hero. Came straight here to post this.
| ramesh31 wrote:
| Sugar water is really really really cheap. It wouldn't surprise
| me if the total cost to produce a can of Arizona was under 5
| cents, with a vast majority of that being the aluminum can.
| Management is just smart enough to accept making a little less
| margin in exchange for maintaining the brand.
| wly_cdgr wrote:
| Why not? It used to cost 1 cent to make, now it maybe takes 2 or
| 3....they can afford it
| mc32 wrote:
| I mean, it's mostly (cheap) sweetened water... They may take some
| small margin hits but keep or grow market share.
| orev wrote:
| I'm not sure if there's a formal name for this fallacy, but it's
| pervasive in almost all financial reporting: the sticker price
| has nothing to do with the cost of materials; it's driven _only_
| by how much people are willing to pay.
|
| As a manufacturer, if the cost to produce something is higher
| than what customers are willing to pay, then you simply don't
| sell it.
|
| There are commodities where this doesn't apply as much because
| there's enough competition keeping downward pressure on the price
| so it floats just above the actual raw materials price, but other
| than that, this concept applies to most products.
| jedimastert wrote:
| I think what would be closer to the truth is that the worth of
| the product _to the customer_ is independent of the cost of
| manufacture of the product.
| tomrod wrote:
| Correct. This is why supply is modeled separately from
| demand.
|
| Supply shocks affect prices differently from demand
| (typically, preference) shocks as well.
| WalterBright wrote:
| The cost of materials is often only a small part of the final
| cost - there's the cost of manufacturing and all the other
| costs of running a business.
|
| Grossly underestimating these other costs is a major reason why
| new businesses fail.
| bko wrote:
| Cost definitely impacts the price. In a perfect competition,
| the price would be the marginal cost to produce an additional
| unit. This would result in maximizing the revenue. Even in a
| monopoly, the price is where the marginal cost and marginal
| revenue intersect, but the price charged would be the average
| revenue. In both cases cost impact the price charged.
|
| There are other things that affect price, including consumer
| demand. But cost is absolutely a factor. Saying "the cost is
| what people are willing to pay" is a tautology and not very
| useful.
|
| http://www.sanandres.esc.edu.ar/secondary/economics%20packs/...
| kortilla wrote:
| Cost sets a floor on the sell price, nothing more.
| bko wrote:
| I gave a clear explanation of pretty mainstream economics
| that no economists would disagree with. But okay.
| dlp211 wrote:
| Even this isn't true. Lots of products can and are sold at
| a loss for various reasons.
|
| Some examples: Various video game consoles, grocery store
| loss leaders, Black Friday doorbuster deals, inventory
| liquidation.
| lumost wrote:
| There is no perfect market for "Arizona ice tea". Arizona Ice
| tea is available in most locations, has a consistent flavor,
| and is easy to access.
|
| The customer isn't deciding which tea to buy based on price,
| they are deciding whether it's worth buying an Arizona ice
| tea at the current moment of time. Changing the price of
| Arizona ice tea will influence this decision, but so will
| marketing, and shelf placement.
| kube-system wrote:
| Individually modeling any single actor in a market (whether a
| monopolist or not) accurately is tough, because they can make
| decisions for reasons other than profit maximization. As your
| source mentions:
|
| http://www.sanandres.esc.edu.ar/secondary/economics%20packs/.
| ..
|
| Economic models are more descriptive of behavior than they
| are prescriptive of behavior. It is possible that a factor in
| a model is not considered by the participants. Vanishingly
| few, if any, companies are going to be drawing profit
| maximization curves to make pricing decisions. Most of them
| don't have the information to draw it even if they wanted to.
| For most companies that do follow that model, it's by an
| accident of the invisible hand, not because they made a
| decision that way.
| ncmncm wrote:
| Except there is no perfect competition, and none for Arizona
| Iced Tea: only Arizona sells it, no one else.
|
| They are, of course, engaged in competition with Pepsi, and
| also with water, food, and rent. If they were to raise their
| price, some number of people may decide they don't need _any_
| Arizona Iced Tea.
| bko wrote:
| Right. The two extremes are perfect competition and
| monopoly. The truth lies somewhere between the two. In both
| cases supplier costs affect price
| ncmncm wrote:
| No. At monopoly, cost has zero effect on price.
|
| Except, the cost of a substitute might, where the
| substitute participates in a real or regulated market.
| So, price under a rail monopoly may be bounded by the
| cost of trucking.
| bko wrote:
| Please see the link I attached in my first post. Again,
| what I'm saying is pretty basic well accepted economics.
|
| Think about it in the extreme. Suppose the cost to
| produce the product goes up above the current price.
| Obviously the price will have to go up.
|
| Or imagine the cost goes to nothing. Then depending on
| the elasticity of demand, you might make more money
| selling more for a lower price.
|
| Stop trying to reinvent economics.
|
| http://www.sanandres.esc.edu.ar/secondary/economics%20pac
| ks/...
| Dylan16807 wrote:
| > No. At monopoly, cost has zero effect on price.
|
| Only if that monopoly is actively being substantially
| abused.
|
| If you're only slightly taking advantage of a monopoly,
| then your price is mostly tied to normal supply and
| demand rules.
| ncmncm wrote:
| Price might be depressed below "whatever the market will
| bear" by trying to be a less attractive target to
| potential competition, or to fend off anti-trust
| enforcement. But those are not driven by your own costs.
| Dylan16807 wrote:
| If you're fending off antitrust enforcement, then you're
| likely trying to price things as if you had no monopoly.
|
| Which means you base the price off of cost and demand,
| like a normal product.
| RustyConsul wrote:
| i remember learning this in college. It's absolutely false
| now though. Late-stage capitalism has different ideas as
| those basic graphs don't take into account any amount of game
| theory. There's perfect competition in coffee but marginal
| cost the the end user does not anywhere approach marginal
| cost.
| kortilla wrote:
| > Late-stage capitalism has different ideas as those basic
| graphs don't take into account any amount of game theory.
|
| This has nothing to do with late stage capitalism. The
| parent post misunderstands cost to the producer and the
| price charged for the end product.
|
| > There's perfect competition in coffee but marginal cost
| the the end user does not anywhere approach marginal cost.
|
| This is 100% bullshit if you actually care about coffee.
| bluedino wrote:
| Remember when Walmart had the vending machines in the front of
| the store? Sam's Cola was 25 cents while Coke/Pepsi were a
| dollar.
| [deleted]
| EGreg wrote:
| But of course, the money surplus has to go SOMEWHERE... and
| eventually someone would defect, and take a loss to make up on
| volume.
|
| I have asked wholesalers this (who produce cars, lighters,
| etc.) and they say that they have a licensing agreement and can
| just kick out retailers who sell below MSRP too much. So those
| retailers would have to then get the goods from other
| retailers.
| RustyConsul wrote:
| >kick out retailers who sell below MSRP too much
|
| i've worked alot in a bunch of company's when i was selling
| NSN's and mostly it works by your volume. You can sell at
| whatever price point you want but this is your price based on
| volume.
|
| Jobber: 500, at $1.30 distriibutor: 1000, at $1.20 wholesale:
| 10000, at $1.10 partner: 1000000, at $1.00
|
| Sometimes it makes sense to sell some inveentory at a loss to
| ensure you maintain the 'bucket' and happens all the time.
| benp84 wrote:
| Counterexample: Suppose I'm selling a product with zero cost
| and I've determined the profit-maximizing price to be $1.00.
| This means profit as a function of price is maximal and
| therefore the slope is zero, i.e. raising the price by 1% makes
| sales go down by 1% and vice versa.
|
| Now suppose my cost to produce goes from zero to $0.99 per
| unit, which drops my profit to $0.01. Now that 1% increase in
| price that only drops sales by 1% is well worth it because my
| profit per unit doubles. The profit-maximizing price is now
| likely well over $1.
| OJFord wrote:
| Or perhaps even clearer: go to the other limit, cost of $1;
| drop in sales while going from break even to profitable.
| ddingus wrote:
| Then one must still consider demand and how buyers value the
| product.
|
| Max profit becomes far more complex!
|
| A second order view might be:
|
| Say at $1.99 one gets X sales, Y sales at $2 (and yes, that
| is a real thing), Z at $3, $5 etc...
|
| Clearly, selling for the $5 maximizes profit per unit sale,
| but if volume is more than double at $3.99, overall profit
| will be maximized by far higher unit sales.
|
| The buyers will weigh product benefits vs their time, liquid
| dollars and competing products.
|
| Fewer of them see a favorable value proposition at $5 than do
| at $3.99. Maybe more see it at $2.50, but not enough more to
| make more profit over the life of the product.
|
| And a third order strategy could be:
|
| One layer above that is time. Early on, if the product is
| well differentiated, has a strong value proposition, max
| money may in fact linked to a price ramp downward.
|
| Start at $5, then drive new sales at $4.50, etc, until late
| in the cycle to sell against competition, one is selling down
| at $1.99. While this is being done, cost reductions and other
| product enhancements can keep margin high.
| [deleted]
| simulate-me wrote:
| I don't know if you've even seen a supply and demand graph, but
| there is a price a supplier is willing to sell at, and a price
| the buyer is willing to pay. The supplier's price is based off
| of their costs. Saying the price is only determined by the
| buyer makes no sense.
| kbelder wrote:
| And yet...
|
| _points_
|
| Arizona Ice tea. Unchanging price, changing costs.
|
| I think what everybody is missing is the 'tends' qualifier.
| Price _tends_ to rise with increased demand; price _tends_ to
| drop with increased supply. It 's true, but simplified, and
| can be influenced by a near infinite amount of other factors,
| like most other behavioral laws.
| simulate-me wrote:
| > Arizona Ice tea. Unchanging price, changing costs.
|
| This just means the demand curve is very price sensitive,
| but it doesn't mean the supply curve doesn't exist. There
| is an element of survivorship bias to all of this. Products
| on the market exist because there is a point the supply and
| demand curves intersect. It's totally that the price people
| are willing to pay for Arizona ice tea will be less than
| the cost to produce it, at which point Arizona ice tea will
| cease to exist.
| Clent wrote:
| Economists love their supply demand graph.
|
| This article is saying the graph isn't enough. This seems
| obvious on its face, reminds me a friction in physics, where
| you can ignore it until you cannot. But physics is not
| incapable of measuring the friction.
|
| The concern is if economists able to account their model's
| friction.
| doubled112 wrote:
| We assume iced tea is sold in a spherical can in a vacuum
| in economics too?
| Kranar wrote:
| The fallacy is you stating something that's just plain wrong.
| The basic law of economics is that price is determined by BOTH
| supply and demand, whereas your statement is that price is
| determined only by demand.
|
| The cost to manufacture a product is one of the key components
| that determines the supply of a product; the higher the cost to
| produce, the lower the supply and hence assuming demand doesn't
| change then the price will increase. Of course demand may not
| stay the same, could increase or decrease.
| CraigJPerry wrote:
| >> price is determined by BOTH supply and demand
|
| Most of economics teaching is about exploring just how wildly
| wrong econ101 is.
|
| E.g. who passes on insulin since the last price increase?
|
| E.g. why does a basic black and white rolex daytona cost
| around PS12k at an authorized dealer? (For non-watch people
| there's a 10 year wait list to buy at that price but you can
| buy 2nd hand immediately for a LOT more)
| akavi wrote:
| People certainly pass on specific kinds of insulin when
| their price increases.
|
| Note that the "old" kind of insulin is available for 25
| $/vial. It sucks in a lot of ways (requires more frequent
| dosage, and has a smaller margin of error), but it is
| dramatically cheaper than the newer and better kinds.
|
| So financially strapped diabetics do have a trade off
| available to them.
| WalterBright wrote:
| > why does a basic black and white rolex daytona cost
| around PS12k at an authorized dealer?
|
| Because they're buying a status symbol, not a watch.
|
| > For non-watch people there's a 10 year wait list to buy
| at that price but you can buy 2nd hand immediately for a
| LOT more
|
| An excellent demonstration of Supply&Demand at work. Your
| example doesn't refute S&D at all :-)
| CraigJPerry wrote:
| >>> the sticker price has nothing to do with the cost of
| materials; it's driven only by how much people are
| willing to pay
|
| >> why does a basic black and white rolex daytona cost
| around PS12k at an authorized dealer?
|
| > Because they're buying a status symbol, not a watch
|
| QED?
| kube-system wrote:
| The supply curve you are thinking about exists when you are
| talking about a market with multiple suppliers. If we're
| discussing a single product from one supplier, the supply
| curve becomes a vertical line.
| colinmhayes wrote:
| No it doesn't... You don't think Arizona Iced tea would
| produce more cans if everyone started wanting them for $2?
| Marginal costs increase as the company expands due to
| bureaucracy.
| kube-system wrote:
| Arizona will sell you as many cans as you want, and as
| many as they can supply, at their asking price.
|
| Their overhead costs _per unit_ decrease as a company
| grows.
|
| The increase as you travel right on a supply curve
| represents the entry of more participants offering
| supply. You can think of a supply demand curve like a
| bunch of dots, representing different suppliers asking
| prices.
|
| Imagine you're graphing a bid/offer spread chart for a
| stock. Arizona's product offering is a single "offer".
| colinmhayes wrote:
| > Overhead costs per unit decrease as a company grows.
|
| This is correct to an extent, at Arizona's size it is
| wrong. It would cost them a lot to increase production.
| kube-system wrote:
| Sure, technically speaking, it's not an infinitely
| vertical line, it has an lower and upper terminus, and
| might begin again at another y value.
|
| But we're already misusing the model to begin with. The
| line is intended to represent multiple suppliers
| participating in a market for a good with a fungible
| source. It is not and never has been a model for pricing
| decisions at a single company.
| garbagetime wrote:
| I think the point he was making is that change in supply
| doesn't _necessarily_ lead to a change in price. I don 't
| know if that's what they teach in basic economic s, but it's
| certainly true.
| bko wrote:
| All else being equal, a change in supply will change the
| price, except in perfectly elastic demand, in which case
| less would just be sold at the same price.
|
| Sure not everything is always equal, but the relationship
| is clear
| Kranar wrote:
| The post I replied to doesn't mention supply either
| directly or indirectly, rather it states the following:
|
| "[prices are] driven _only_ by how much people are willing
| to pay. " Emphasis theirs.
|
| That statement is false, prices are a function of both
| supply and demand and supply is a function of manufacturing
| costs. The cheaper something is to produce, the more of it
| one can produce and hence the greater the supply.
| ncmncm wrote:
| If people don't need it, they may simply choose not to
| buy.
| jjeaff wrote:
| A more accurate statement might be: prices are upper
| bounded by what people are willing to pay.
| drugstorecowboy wrote:
| _The cheaper something is to produce, the more of it one
| can produce and hence the greater the supply._
|
| This only affects the price if there are competitors. If
| I want a widget, the total supply of widgets is
| irrelevant. For example Insulin, the fact that you have
| tons more of it won't make the price go down, you have it
| and I need it. You can sell it for whatever I am willing
| to pay irrespective of supply or production costs.
| OJFord wrote:
| I think that quote is fine if you read 'how much people
| are willing to pay' as meaning the whole order book (as
| it were) - i.e. how many people are willing to pay how
| much.
|
| The price is usually (an attempt at) optimising profit,
| where that may mean selling for more dollars to fewer
| people.
|
| _Ceteris paribus_ a reduction in the cost of supply
| doesn 't change that calculation.
|
| (Though, as the economist in my family says, 'ceteris
| never bloody is paribus'!)
| Dylan16807 wrote:
| > I think that quote is fine if you read 'how much people
| are willing to pay' as meaning the whole order book (as
| it were) - i.e. how many people are willing to pay how
| much.
|
| It's really not though.
|
| If I give you the full detailed order book of a secret
| product and ask you to set the price we should use as a
| company, you won't be able to do it. You need at least a
| rough idea of the production cost first.
|
| If people will buy 10x as much at $100 compared to $200,
| then we should probably price at $100 if our cost is $40,
| and we should definitely _not_ price at $100 if our cost
| is $120.
|
| If you want to set a price off of one data lump, you need
| to replace the revenue numbers in that order book with
| margin per unit.
| OJFord wrote:
| Yes, true, I suppose I'm assuming a pre-
| existing/otherwise somehow known wide margin.
|
| The optimisation I describe is on profit, not revenue,
| and (as you say) you need to know the fixed and variable
| (marginal unit) costs to do that.
| tj-teej wrote:
| "The basic law of economics is that price is determined by
| BOTH supply and demand"
|
| That is _one_ basic law of economics, but in some markets
| price isn 't only determined by supply and demand.
|
| I think a similar/analogous example for the price on the can
| is minimum wage. Yes, in a lot of cases wages are set by the
| intersection of supply and demand, but if that intersection
| is below a minimum wage then the "price" of labor (the wage)
| is the minimum wage. Now there's economic implications of
| that too, but at the end of the day in the US you can't pay a
| McDonalds employee $2 an hour and a corner store can't sell
| an Arizona tea for $2.
| thwayunion wrote:
| _> The basic law of economics_
|
| It's not a law. It's a model. A very simple model. Of a very
| complex system.
|
| Computer Scientists never invoke Turing machines or the
| simply typed lambda calculus in debates about specific pieces
| of hardware or compiler implementations, _except in cases
| where those models are actually applicable and in ways that
| comport with the pieces of those systems for which the model
| is usefully faithful._
|
| The Econ 101 "supply & demand curve" is way simpler than
| TMs/lambda calculi, AND it's modeling a much more complex
| system than a computer/compiler. Yet, somehow, the model is
| constantly invoked.
|
| There's a really good reason that every single financial
| analyst in the world goes directly to "pricing power"
| whenever they are asked to analyze the effect of "supply
| chains".
| itsoktocry wrote:
| > _There 's a really good reason that every single
| financial analyst in the world goes directly to "pricing
| power" whenever they are asked to analyze the effect of
| "supply chains"._
|
| Every single one, eh? Sounds like you need some new
| financial sources. Though, based on the tone and disdain in
| your comment, it's unsurprising you haven't looked far.
| thwayunion wrote:
| Thank you. This post perfectly demonstrations my
| observation. I have never seen a physicist get viscerally
| frustrated because he knows some small minority of folks
| who use Newtonian mechanics in regimes where most other
| physicists concur it's a bad model.
| Kranar wrote:
| Laws in the sciences are all components of models. Newton's
| three laws are a component of Newtonian mechanics, so are
| the laws of thermodynamics. Arguing semantics about what a
| law is is the least interesting aspect of this discussion,
| with that said you are free to use whatever term you want
| but should at least be familiar that in general the term
| law of supply, law of demand, and that much of economics
| uses the term law to codify a set of common observations
| that are used as the basis for further derivations:
|
| [1] https://en.wikipedia.org/wiki/Law_of_demand
|
| [2] https://en.wikipedia.org/wiki/Law_of_supply
|
| [3] https://en.wikipedia.org/wiki/Category:Economics_laws
| thwayunion wrote:
| The important difference I'm commenting on is that
| engineers and physicists rarely get confused about when
| Newtonian mechanics or thermodynamics are useful models.
| Even when they do, their "belief" in these laws is not
| taken as religious or political. Beliefs in models are
| quickly dispelled when it becomes obvious that the model
| is too wrong to be useful.
|
| I rarely see economists invoke Econ 101 models such as
| [1],[2] except in extraordinarily constrained settings.
|
| If you aren't invoking theorems about beta reduction for
| the simply typed lambda calculus to reason about C's
| memory model, then consider also refraining from using
| [1],[2] to analyze pretty much anything in a real
| economic system.
|
| This isn't pedantic. This is a real difference in how
| engineers and software people treat laws in the natural
| sciences vs how laws get treated in economics by the same
| set.
|
| You can call it a law, or a model, or whatever. The point
| -- and, not a pedantic one -- is that [1],[2] are almost
| never accurate enough to be useful and calling them laws
| doesn't change that fact.
| WalterBright wrote:
| I've seen a lot of people theorize that the law of
| Supply+Demand price setting doesn't apply, or that it can
| be repealed by the legislature.
|
| They're always wrong.
|
| Feel free to prove me wrong with a case history.
| thwayunion wrote:
| _> I 've seen a lot of people theorize that the law of
| Supply+Demand price setting doesn't apply, or that it can
| be repealed by the legislature._
|
| What constrains the supply of copies of a piece of
| software?
| WalterBright wrote:
| > what, exactly, constrains the supply of copies of a
| piece of software?
|
| Nothing. Nearly all the software I use is free.
| thwayunion wrote:
| thwayunion wrote:
| The answer is the legislature, via copyright and patent
| law. You know this, you know the point I'm making. Your
| choice to be coy and unserious makes me wonder if you
| even sincerely hold the position you're arguing.
| WalterBright wrote:
| I'm very serious. My Linux system is my main dev system.
| I didn't pay a dime for any of the software on it. I
| write and distribute, for free, software. It's all
| copyrighted and legal. You can distribute it, too, at
| zero cost. You don't even have to ask my permission. Feel
| free!
|
| How about you being more specific?
| thwayunion wrote:
| You asked for an example of the legislature writing the
| laws of supply and demand, on the forum at least in large
| part about the software industry. An industry whose
| primary product has zero marginal cost but is none-the-
| yet scarce due to the acts of legislative bodies.
|
| Supply, demand, and price can all be manipulated,
| including in ways that divorce one from the other two.
| Either by governments or by sufficiently large private
| actors. This... isn't controversial, even among the most
| staunch of neo-classical economists.
|
| _> How about you being more specific?_
|
| Believe it or not, there exists non-free software. So, to
| be more specific, I am referring to literally any machine
| that is not running a completely FOSS stack. Or even any
| machine that IS running an entirely FOSS stack but is
| being used in commerce and where some parts of that
| software stack are patent-protected!
|
| I.e., basically every machine used for commerce and the
| vast majority of consumer machines. 99% of the global
| install base? More?
|
| Again, this whole thread is an excellent demonstration of
| my original post. This is the Econ equivalent of getting
| into an argument with a political scientist over whether
| NVIDIA's latest chip is really just a <insert idealized
| model of computation>. These arguments _don 't even
| happen_, except in econ with non-economists, because
| nobody has strong ideological attachments to Newtonian
| mechanics or the number of tapes on a turing machine or
| whatever.
| WalterBright wrote:
| > You asked for an example of the legislature writing the
| laws of supply and demand
|
| Rent control is an obvious example. Minimum wage laws,
| another. Anti-gouging laws, still another. All of them
| fail.
|
| You appear to be arguing that S&D only applies to the
| marginal cost of reproduction. This is not the case.
|
| Let's take an extreme example. You need some custom
| software for your business. You come to me. I'm going to
| charge you what it takes to _develop_ the software plus a
| profit. Not the cost of reproduction of the software.
| Whether you and I agree on the price or not is a function
| of S &D.
|
| And there's every point in between that and Linux.
|
| BTW, I bet you're using a free browser to access
| HackerNews (I am - Chrome), and HN itself makes itself
| available for free.
|
| As for copyright law, it is not setting prices any more
| than a law making it illegal to steal apples from my
| orchard is interfering with S&D.
|
| > nobody has strong ideological attachments to Newtonian
| mechanics
|
| S&D is not an ideology. It's the Law. Just like NM is the
| Law. It applies whether you believe it or not. You can't
| escape it. The communists tried really, really hard to
| deny the existence of S&D. They had about as much success
| as the flat earthers. Today's Progressivists are
| currently doing their best to deny S&D, with as little
| result as the communists.
|
| And yes, I know NM is an approximation of Quantum
| Mechanics.
| JulianWasTaken wrote:
| I'm no expert myself, but my layman's understanding of
| some of the pushback behavioral economics has for the
| field of economics is relevant for your point.
|
| Specifically, from what I've seen, behavioral economics
| precisely wishes to reject predicting behavior via these
| simple economic models in favor of more nuanced
| understandings of complex behaviors, derivable only
| through empirical observation of what consumers really
| do, not what they should do or a simplistic law predicts
| they should do.
|
| (It's an interesting comparison to CS too.)
| thwayunion wrote:
| _> (It 's an interesting comparison to CS too.)_
|
| Particularly since the first behavioral economist to get
| a Nobel was also an early pioneer in many fields which
| are now housed in CS departments: programming languages,
| artificial intelligence, theorem proving.
| severine wrote:
| > the first behavioral economist to get a Nobel
|
| Possibly referencing
| https://en.wikipedia.org/wiki/Herbert_A._Simon
|
| Thanks for your input in this thread!
| hither_shores wrote:
| You're not wrong, but GP's error is much more object
| level than that. The neoclassical paradigm has flaws;
| claiming that all markets are perfectly competitive is
| _not_ one of them. Sweet tea is a textbook case of
| monopolistic competition, and short run inelasticity is
| to be expected.
| WalterBright wrote:
| Supply & Demand does not require perfectly competitive
| markets.
| uoaei wrote:
| There's a really important caveat which is explicit in
| any law: "conditioned on all else being equal".
|
| In physics, we are able to isolate systems to the point
| where this caveat is true and the law can be
| experimentally validated.
|
| In economics, we do not get such affordances, because it
| is not and cannot be a "laboratory science".
| mannerheim wrote:
| GGP said the price is only determined by how much people
| are willing to pay. This is obviously false. If the cost of
| producing a product rises above the current price, even if
| the price people are willing to pay doesn't change, the
| price has to increase or else the business will start
| losing money.
| ncmncm wrote:
| And, sometimes the business starts losing money.
|
| We saw that when oil prices went below many producers'
| extraction cost. They continued selling at the lower
| price, because they had to service existing debt, and
| accumulated more debt until the price went back up.
| skeeter2020 wrote:
| This is also known as the "Groupon Business Model of
| Imminent Failure". Cash today is way more important than
| accounts receivable.
| Ekaros wrote:
| Also sometimes supply or production is inelastic and not
| possible to scale down and up. Thus to have chance to
| generate money in future they had to accept loss now.
| jjeaff wrote:
| They will never raise the price higher than people are
| willing to pay or else they won't sell the product at
| all. Sometimes they will sell at a loss temporarily and
| sometimes they will just sell off all remaining product
| at the highest amount people are willing to pay. Even if
| at a loss because getting something is better than the
| product sitting on shelves. Some products are sold at a
| loss permanently as a loss leader. Like hot dogs or roast
| chicken at Costco.
| Jensson wrote:
| > They will never raise the price higher than people are
| willing to pay or else they won't sell the product at all
|
| That isn't true, at least for some definition of
| "people". They will raise the prices until selling is
| profitable even if most people aren't willing to pay
| that, since there will be some who want the product more
| who pay the premium. If it was profitable to sell for the
| lower price they probably would make more money thanks to
| higher volume though, which is why they had the price
| originally.
|
| Supply vs demand isn't always right, but it is closer to
| right than wrong in most cases. You can look at profit
| margins to see how well supply/demand works in a specific
| field, in software supply/demand doesn't exist no. But in
| most fields profit margins doesn't look like that, they
| are sub 10% meaning that for every 10 dollars you pay
| less than 1 dollar goes as profits and the rest goes to
| pay for the service you bought, that wouldn't be true if
| prices usually followed what people are willing to pay
| instead of being a mix of supply/demand.
| rhacker wrote:
| This is so true. The problem is that the price people are
| willing to pay can go to really, REALLY high for some items
| because there really is no alternative. (Cars,
| Wood/Housing, Raw materials like steel)
| skeeter2020 wrote:
| you're talking about price elasticity and the role of
| substitutes, for which economists also have simple models
| that always get over-applied :)
| hedora wrote:
| Arizona Iced Tea's unit per-economics are closer to software
| than to food.
|
| They both have ridiculously high incremental profit margins,
| so talking about finite supplies doesn't make sense.
| KptMarchewa wrote:
| If you're talking about actual drinkable content, then yes.
| The majority of the costs are in packaging and logistics -
| and those are getting expensive.
| Spooky23 wrote:
| The point of Arizona iced tea is volume sales, and they
| maintain or increase that volume by pricing under Coke/Pepsi.
| Bigger can, smaller dollars.
|
| That business is all about scale. They probably make more per
| unit than coke as they spend zero dollars on marketing.
|
| I did this with an email service. We had runway and sold at
| 30% under cost. After about two years in our little niche, we
| had pushed enough volume that we were making a healthy
| profit. Then we sold the business to a bigger fish.
| LeifCarrotson wrote:
| That's what basic economics theory says, yes, but not what
| happens in practice to make Arizona Iced Tea $0.99. Nor why a
| baggie of 5 screws at Lowes costs $2.99. Supplier costs are
| important in commodities, especially where easily compared
| alternatives are readily available, but that's not true of
| all products.
|
| There are a lot of factors that go into pricing, but for many
| consumer goods the vendor is able to set prices pretty much
| independently of the costs.
| brimble wrote:
| > Nor why a baggie of 5 screws at Lowes costs $2.99
|
| Indeed--and one might well see that price remain stable
| even if the cost of producing the screws _doubled_ ,
| because the margin's already insanely high.
| HWR_14 wrote:
| That's nothing. Coca Cola was famously a nickel from it's first
| bottling until 1960. That was 70 years of inflation.
|
| All because they had vending machines based on taking a nickel.
| gurjeet wrote:
| TFA mentions that, and the reason why, as well.
| Ekaros wrote:
| Just shows how massive the margin was before... Still cheaper
| than water is slightly interesting, but I guess the sugar might
| work as preservative...
| verisimi wrote:
| "Water? You mean like in the toilet?"
|
| https://www.youtube.com/watch?v=-YZnORoAWkA
| tedunangst wrote:
| It would be great if a journalist called up the company to ask so
| we don't all have to guess.
| beaconstudios wrote:
| The author did exactly that:
|
| > "I'm committed to that 99 cent price -- when things go
| against you, you tighten your belt," Vultaggio said on a Zoom
| call in early April from his headquarters on Long Island, N.Y.
| onemoresoop wrote:
| Sweetened water? Probably contains some tea too? It should
| probably be cheaper than that and at the same time not even worth
| ingesting.
| [deleted]
| kart23 wrote:
| that's what coca-cola is too. and they're a pretty successful
| company.
| happytoexplain wrote:
| The negativity here falls a little flat - water, sugar, and tea
| isn't really something I think of turning my nose up at. Of
| course I assume it has a lot of sugar and is therefore
| unhealthy, but your ingredient list isn't exactly offensive.
| cbg0 wrote:
| I don't think the idea was to make it offensive, just to say
| that it's cheap to make.
| rpeden wrote:
| I think the same is true for most drinks that you can buy
| ready-to-consume in small packaging. For me at least, the
| value is mostly in the production and supply chain that
| ensures the drink is created, bottled, and distributed to a
| phalanx of locations such that I can walk into any grocery
| or convenience store and be reasonably sure I can buy the
| drink I want in a single-serving container for a price I
| find acceptable.
|
| So I don't think the product cost of the liquid itself
| really factors into the equation. Or at least it shouldn't.
| I usually assume most of what I'm paying for the logistics
| that lead to the drink being available and ready to drink
| where and when I want it.
|
| I don't think the original comment was offensive, just that
| "it should probably be cheaper" misses the mark because for
| most drinks in this category, the price of ingredients
| shouldn't be a significant factor in determining its value
| to the consumer.
| seoaeu wrote:
| The "not even worth ingesting" part suggests they don't
| hold the product in high regard
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