🚀 go-pugleaf

David Robinson wrote:
> > Every business works that way.  There is a market price for potatoes
> > which is the equilibrium reached in the marketplace between the highest
> > cost producer necessary to satisfy demand, and the highest price
> > consumers are willing to pay.
> 
> That is not how the power market is structured.  Assume the state
> needs 100 units of power, three companies bid:
> 
>         A:      50 units @ $0.10
>         B:      45 units @ $0.12
>         C:       5 units @ $0.20
> 
> As currently structured all 100 units are purchased at $0.20
> giving A an unexpected profit of $5.00 and B $3.60.
> 
> It is one thing for seller A to look at the market and see that
> C was able to sell at a higher price and raise his to $0.19
> in hopes of getting more profit, it is another for the government
> to mandate the extra profit regardless of the offered price!

Think of it this way: You're a farmer and you grow carrots.  Because
your land is exceptionally fertile, it only costs you $0.10/lb to grow
carrots.  You take your carrots to the market, expecting to sell them
for say $0.12 but when you get there you find that, because not
everyone's land is as fertile as yours (or maybe there was a carrot
famine this year or whatever), carrots are selling for $0.50/lb.  You
sell your carrots for $0.50, not $0.12.

There is a single price for carrots (or power) based a balance between
supply and demand.  In a free market, each seller does not sell his
product for a different price based on costs.  That only exists under a
regulated cost-based pricing model (or when buyers have and abuse market
power to force each seller down to a subsistence price).  Instead,
everyone sells at the same price, and the more efficient producers
simply make a higher profit then the less efficient ones.