Originally Posted by
Koyote
Competition reduces prices – – which is the opposite effect from that of a tax.
Competition does not always reduce prices. Sometimes it increases prices. It always kills profits.
Consider an LBS who must pay the prevailing rate for retail space. If the other businesses competing for retail space (say an Apple Store) can afford to pay more, the LBS will be forced to pay more for the space and raise prices to cover the increased overhead.
With few exceptions (rhymes with "blemano"), nobody in the bike industry is rolling in the dough.