The response partially addresses what was intended by my comment. Perhaps I was not complete enough in the original comment.
Note that If the big companies are differentiated in some way (like ‘monopolistic competition’ suggests, there could be a substantial cost to consumers (and to efficiency) to choosing the ‘charity supporting brand’
With monopolistic competition, consumers have different tastes or ‘locations’ and firms enter with differentiated products (or in ‘different locations’). Each firm ends up with some market power and thus charges a price that is ex-post, too high. However, there is a cost of entry, so firms enter until the final firm gets 0 economic profit.
My thinking was that for those who favor the charitable firm, that charitable firm might not be the one ‘closest to me’ … so I might end up travelling further to reap the ‘charitable benefit’, but with a transportation cost (or analogously, a ‘product differs from my preference’) cost that might counteract that benefit.
The response was ~that some products are basically undifferentiated and have no or low entry costs/fixed operating costs. But if there is free entry, why should we expect there to still be profits in such industries? (You can come up with some reasons, but it might be hard to do this without a ‘differentiated product’ after all.)
The response partially addresses what was intended by my comment. Perhaps I was not complete enough in the original comment.
With monopolistic competition, consumers have different tastes or ‘locations’ and firms enter with differentiated products (or in ‘different locations’). Each firm ends up with some market power and thus charges a price that is ex-post, too high. However, there is a cost of entry, so firms enter until the final firm gets 0 economic profit.
My thinking was that for those who favor the charitable firm, that charitable firm might not be the one ‘closest to me’ … so I might end up travelling further to reap the ‘charitable benefit’, but with a transportation cost (or analogously, a ‘product differs from my preference’) cost that might counteract that benefit.
The response was ~that some products are basically undifferentiated and have no or low entry costs/fixed operating costs. But if there is free entry, why should we expect there to still be profits in such industries? (You can come up with some reasons, but it might be hard to do this without a ‘differentiated product’ after all.)