Casino Fined For Making Error--In The Players' Favor!

Quote: bigfoot66

Again you are absolutely right, greed is a universal. But competition checks the greed. When all the companies facing the same fines for mistakes like this in the long run, it becomes a cost that props up prices despite competition.

The question is why you think the prices would not go up "despite competition" in the absence of fines. Clearly, if raising the price allows a business to make more money, it is the right thing for it to do. Whether or not it is being occasionally fined is irrelevant.

As long as the consumer is willing to pay more, the price will go up, because there is no reason for it to stop.

Quote: DJTeddyBear

All businesses, sooner or later, pass on all costs to the customer.

Who else are they going to pass them on to? Suppliers? Government? God?

Look, any business can absorb a certain degree of losses. Those that can't are less able to withstand bad times or even bad seasons. In any case there are limits. Too big a loss can sink any company.

The economy is too interconnected. A rise in costs will be passed on to those who purchase what you sell. That's why higher taxes across the board bring higher prices along for the ride, too. But there are many factors involved. You may not eb able to make up a mdoerate loss, but you may not be able to stay competitive if you raise prices to make up for it. So you have to turn to other optiosn. You may get a loan, thus amortizing the loss over time (time and money are closely related), or you may fire an employee or two, or reduce some benefits, or sell some assets.

All those options, though, will impact, to one degree or another, how you do business. Less employees may reduce your service quality, or yuor output. Less benefits may reduce morale and thus the quality of service or output, etc.

Quote: Nareed

Who else are they going to pass them on to? Suppliers? Government? God?

Employees? Stockholders?

Quote: Nareed

The economy is too interconnected. A rise in costs will be passed on to those who purchase what you sell.

AND to those who purchase what your competitors sell, and to those who purchase something seemingly unrelated, and to those selling something also seemingly unrelated.

The only situation where an increase in costs directly corresponds to an increase in prices is if the company in question is undercutting. Then its prices are linked to the costs, so it has to let some of its edge go in order to sustain its strategy.

Quote: weaselman

Clearly, if raising the price allows a business to make more money, it is the right thing for it to do. Whether or not it is being occasionally fined is irrelevant.

This is true. It is also true that if lowering the price will make a firm more money, it is the right thing to do. For example Many on this board argue that casinos set their prices too high by offering stingy video poker or 6:5 blackjack (the house edge is the price of gambling), and that they would make more money with less stingy games.

If you want to understand why firms cannot get away with regularly raising prices I suggest searching wikipedia for "Perfect Competition". The interesting thing about a perfectly competitive market is that there is no economic profit for firms, in other words profit rates end up being the same as the rate of return one could get at a bank. Understanding the concepts in that article will make it clearer why consumers ultimately pay these fines in a larger sense. Failing that, think of it this way. If a casino has had to pay between $200,000 and $250,000 in fines for petty errors each of the last 10 years and expects to do so again this year, that is just as real a cost to the casino as food, liquor, labor, utilities, etc. Surely the gambler pays the price for the free drinks and free hotel rooms by gambling. He also pays the costs of spreading the game. Well, these fines are just as much a part of the costs as buying cards and dice, dealer uniforms, etc.

Quote: weaselman

As long as the consumer is willing to pay more, the price will go up, because there is no reason for it to stop.

This is unquestionably not true. Do you know anyone who needs, say, insulin for diabetes? I did a quick search online and it costs about $75 for a small bottle. I am very confident that someone who would likely die without insulin would be willing to pay 100x that amount for insulin.

Bad example? Because people need it to live? OK, how about beer? I went to a Snoop Dogg concert at Harrah's Rincon San Diego last year. I paid $12 (!) for a 16 oz aluminium bottle of Bud Light. This means that, at least sometimes, I value beer that highly. At the store I rarely pay more than 80 or 90 cents for a 12 oz bottle of Bud Light. Why don't the fools at Ralphs double or tripple their prices? Is it not clear that I am getting a great deal from them?

Quote: bigfoot66

This is unquestionably not true. Do you know anyone who needs, say, insulin for diabetes? I did a quick search online and it costs about $75 for a small bottle. I am very confident that someone who would likely die without insulin would be willing to pay 100x that amount for insulin.

Not if it costs $76 over the corner.

Medications that are still protected by monopoly patents do command exorbitant prices, if they are life-critical.
Insulin market is a FDA-protected oligopoly in US, preventing anyone else from entering. Outside US, insulin can be found an order of magnitude cheaper.

The only thing keeping the price of patent or FDA protected monopolies down is that you can fleece a sheep many times, but only skin him once. If you charge more for the drug than your patient can pay, he dies or buys from a Canadian smuggler and you don't get anything the next week.

Quote: bigfoot66

This is true. It is also true that if lowering the price will make a firm more money, it is the right thing to do.

Indeed. That was exactly my point.

Quote:

If you want to understand why firms cannot get away with regularly raising prices

Oh, I understand that.
What I don't understand is how that situation changes in your view by the introduction of fines.
If the company can get away with increasing the price, it will increase it, if it cannot, it won't.
Whether or not it is being fined for some violations in the process is orthogonal to that,

Quote:

This is unquestionably not true. Do you know anyone who needs, say, insulin for diabetes? I did a quick search online and it costs about $75 for a small bottle. I am very confident that someone who would likely die without insulin would be willing to pay 100x that amount for insulin.

No, unfortunately, he won't. He just would not have that kind of money.

Quote:

This means that, at least sometimes, I value beer that highly. At the store I rarely pay more than 80 or 90 cents for a 12 oz bottle of Bud Light. Why don't the fools at Ralphs double or tripple their prices? Is it not clear that I am getting a great deal from them?

You may want to follow your advice on searching wikipedia for competition. I am sure, you can find an explanation there.
Besides, search for supply and demand equilibrium. Yes, sometimes you are willing to pay a lot more for beer then other times. But if you had to pay that much all the time, you'd end up buying less beer, and spending less money on it, then you would otherwise.
I am sure, you understand how it works, and I doubt you don't know that I understand it too. So, the question is what was the point of that example?

BTW, the insulin example may be a good answer to the question of whether government or private regulation is better.

You may have faith in your government, or you may not. But the difference is, if you don't trust a private certification organization, you can always rely on another, or not on any at all, pick some other criteria for making your choices. If a government regulator is screwing up or screwing with the market on purpose to help private interests (like FDA does with insulin), your only choice is to be screwed.

Quote: bigfoot66

This is true. It is also true that if lowering the price will make a firm more money, it is the right thing to do. For example Many on this board argue that casinos set their prices too high by offering stingy video poker or 6:5 blackjack (the house edge is the price of gambling), and that they would make more money with less stingy games.

On the other hand, the Caesars casinos also don't charge resort fees, offer the 24-hour buffet and show passes, offer a variety of lodging options and a re knwon to be loose with free stays (more or less, not loose enough for me). The one may, in the judgment fo some consumers, balance the other; or even overbalance the other.

Not all businesses are all of a piece.

Quote: weaselman

Oh, I understand that.
What I don't understand is how that situation changes in your view by the introduction of fines.
If the company can get away with increasing the price, it will increase it, if it cannot, it won't.
Whether or not it is being fined for some violations in the process is orthogonal to that,

I am not sure that we will see eye to eye on this as I have said the same thing a few times now, but I will try to explain it one more time. The point is that no one is perfect, and over the course of 10 years, each casino would expect to make, say, 25 errors like leaving the 10's in the spanish game. Therefore each casino would have about $25,000 in silly fines (IMO) each year. Since this is a cost that each casino must bear, prices will be higher than were there no such fines. Similarly, when gas prices go up the airlines all charge more for plane tickets. Competition limits profits but does not limit absolute cost. Therefore when it is more expensive to operate a business, prices inevitably go up. Consumers bear the costs of operating an enterprise. I apologize if this is not clear.

Reading over this post (and some earlier ones) I realize that it may come across as patronizing or belittling, it is not meant to be. I am trying to write as clearly as possible so please do not take offense

Quote: P90

BTW, the insulin example may be a good answer to the question of whether government or private regulation is better.

You may have faith in your government, or you may not. But the difference is, if you don't trust a private certification organization, you can always rely on another, or not on any at all, pick some other criteria for making your choices. If a government regulator is screwing up or screwing with the market on purpose to help private interests (like FDA does with insulin), your only choice is to be screwed.

Bastiat talked about "the seen and the unseen" effects of regulation. The effect that you mention is terrible and it is a "seen" effect of the FDA. Their policies double the price of insulin, lets say. This hurts consumers. But the unseen effects are even worse in part because they are costs we do not realize we are paying. When the FDA approves a drug that kills people it takes a lot of heat. If they fail to approve a drug that would have saved an equal number of lives, nothing happens to them. Because of this, they tend to underapprove drugs and approve them too slowly. This costs people their lives.

Think about this. There are treatments for rare fatal diseases that are not FDA approved. It is actually illegal for dying person to take a drug that is not FDA approved. Imagine if your wife was dying of a rare disease with no approved treatment, and there was a pill that Doctors used with mixed success in say, Europe. It would be illegal for your doctor to help her try to get it and I believe it is actually illegal for your wife to try it on her own. This is the unseen effects of regulation. The argument for the FDA usually begins with "people will die from unsafe or untested medications", a claim that I do not believe. But even if it true, we know that people do die every year because the FDA will not allow them to try to medicate themselves.