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: Don: My point is that if demand is sufficiently high, there is no point in engaging in a price war. It only reduces profit.: Well, if you don't believe in the original doctrine of capitalist COMPETITION, then I guess this era of INTERNATIONAL MONOPOLY is alright by you.
Don: If your factory is running at full production making candy bars, and you are having trouble meeting demand at $100 per candy bar, why would you drop your price to undercut the "competition"?
Don: If you have good reason to think you can drive the competition into the ground and then put the price of candy bars as high as you want, that *may* be a possible motivation. You will have to accept lower profits while the price war is in effect, and you have to be able to "win" the price war for it to make any sense. Also, consumer demand may not support prices higher than $100 for a candy bar, regardless of the supply of candy bars. What will likely make the most sense is to not undercut the competition's prices, and to optimize your own profits.
Don: The point is that competition only comes into play if demand is insufficient for the needs of all the producers.
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