Substitution Power

   "Winning isn't everything. It's the only thing." --Vince Lombardi

   "Profit isn't everything. It's the only thing." -- Daddy Greenbacks

   "We make it up in volume." -- Anonymous

   As consumers lose the power to bargain, they become price takers. They have little choice; they either buy at the producer's offer price or they do without. When the customer base is large enough, losing a few to price increases when there remain many others willing and able to pay more matters little. There may be fewer buyers, but the higher price yields a net increase in revenue. To the professional economist, this concept is called "elasticity," and it can be reduced to a mathematical formula so the producer can know whether a price increase will boost total profits.
   Elasticity also works in reverse -- a price cut can attract more sales volume, offsetting a reduction on a single unit, and bringing in more net profit.
   So who cares? If consumers have no bargaining power, what difference does it make? To the producer, none, because profit is the reason for the existence of the business. To the consumer, however, a difference in price can mean the difference between purchasing or doing without.
   There is always a choice.
   Sometimes, of course, a consumer can choose to do without. But is that really a choice, when to do without means hunger or sickness?
   Otherwise, there is Substitution Power, the ability of the consumer to switch to margarine instead of butter, for example. Or trade in a Hummer for a Toyota, or take the bus to work, or ride a bike or even walk.
   Price, however, is not the only reason to exercise Substitution Power.
   Consider the aggravation factor. Airlines are becoming more crowded as managers reduced the number of flights and raised fares to overcome higher fuel prices. In addition, tighter security brought delays and body searches at the terminals.
   Result: Many frequent travelers, especially those along the Northeast Corridor between Boston and Washington, have opted to take the train.
   Amtrak recently reported a near doubling of ridership as travelers abandoned air travel, with its frequent delays and intrusive searches, and gained the convenience of downtown-to-downtown travel, the ability to use computers, cellphones and other devices on board, and dining cars.
   What's more, downtown-to-downtown and door-to-door travel time may be about the same.