If some market has large margins, it means it has some inefficiencies.
no, that is a commodity market. Brand recognition and other kinds of markets are not like that.
If your model of an ideal market suggests that the realistic and practical approach is inefficient, i.e. your model fails when confronted by reality, your model is horseshit.
Also brand recognition and trust has real value because clearly people are willing to pay for it. Value isn't something intrinsic in an object. Value derives from what people are willing to pay. If people pay more for a rock with an Apple logo on it, then the rock with the Apple logo is more valuable. It's a quality other rocks don't have.
And what does "non-economic reasons" even mean? Should we all only drink tap water because it's cheaper and keeps us alive just as well? Or are we allowed to have some pleasure in life as well?
What in the...
I thought about quite often while visiting a pub owned by the land lord renting out 150 rooms above. Each floor had a large industrial shared kitchen, shared bathrooms, toilets and a large shared living room. If people had 1-2 guests they would stay in their room, if they had 2-10 guests they would use the shared space, if they had 4-80 guests they would take the elevator to the pub. When one was bored with the guests or didn't have time they were left in the pub. Technically people had bar shifts in their rent contract (that you could buy your way out of) but there were plenty who enjoyed running the bar for free. Drinks were at cost. If you tried to tip or didn't take your change they left it on the counter and it would sit there for a day or two. The problem of the pinball machine earnings they solved with rounds of free drinks and chips.
When asked the owner said exploiting a bar was entirely to much work. If he wanted more money from the people living there he could just increase the rent?
Most inefficiencies come from hard-to-get-into markets, like telecom market is an oligopoly. Or information disbalance (business actors hide their pricing, khm.. hospitals khm..). A good government would try to remove them inefficiencies as much as possible (public pricing, easy-to-get capital), and make every business race-to-the-bottom competition.
Gross margin of zero would be mean you sell at exactly the cost to produce. Net margin of zero means you cover all your expenses including COGS. The only really difficult, practically impossible, thing would be doing both at the same time. Though, I could also see a case where you drive down net margins once sunk costs are paid and achieve both.
Doing so practically, or sustainably, in most circumstances would be uhh crazy… but it’s not impossible. Even then I think aiming for zero margin is a pretty credible tactic in eliminating competition if you can out sustain them.
TLDR; Weird? Sure. But not impossible. And even sort of likely if you’re trying to atrophy your competition out of existence.
