> Margins are not determined by how many companies sell certain products
Rule 1: Margins are as large as a company can get away with them being
Rule 2: The primary thing that brings down prices (thereby shifting consumer demand) is another company competing offering lower prices
Rule 3: Fewer companies are able to maintain a unified front of higher-than-required margins for longer, owing to fewer individuals needing to agree to make the prsioner's-dilemma-esque status quo hold. Any one of them can take business from the others by lowering their prices, but at the cost of reduced margins for everyone (including themselves).
Margin pricing in general is "sticky". When it goes down, its difficult for it to rise. That's why companies jump on inflation as an excuse to raise prices - usually much more than inflation. Similarly, see power prices in Europe after ukraine war - record profits despite attributing price rise to rising supply chain costs.
Yes, this doesn't follow your economics 101. This is economics 102.
As soon as there is an "excuse", companies make massive profits and margins rise. This will also cut into demand as price-sensitive consumers drop out. This is seen as fine. Sometimes, it is better to make more money from less work than grow less efficiently.
it explains why typically markets with fewer players have higher margins. This is why competition is good (and also why the government has whole departments to consider whether mergers in sparse markets will hurt consumers)
Rule 1: Margins are as large as a company can get away with them being
Rule 2: The primary thing that brings down prices (thereby shifting consumer demand) is another company competing offering lower prices
Rule 3: Fewer companies are able to maintain a unified front of higher-than-required margins for longer, owing to fewer individuals needing to agree to make the prsioner's-dilemma-esque status quo hold. Any one of them can take business from the others by lowering their prices, but at the cost of reduced margins for everyone (including themselves).
Margin pricing in general is "sticky". When it goes down, its difficult for it to rise. That's why companies jump on inflation as an excuse to raise prices - usually much more than inflation. Similarly, see power prices in Europe after ukraine war - record profits despite attributing price rise to rising supply chain costs.
Yes, this doesn't follow your economics 101. This is economics 102.
As soon as there is an "excuse", companies make massive profits and margins rise. This will also cut into demand as price-sensitive consumers drop out. This is seen as fine. Sometimes, it is better to make more money from less work than grow less efficiently.