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.
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.
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.