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iancmceachern 7 hours ago

You highlight the exact dilemma.

Company A has taxis that are 5 percent less efficient and for the reasons you stated doesn't want to upgrade.

Company B just bought new taxis, and they are undercutting company A by 5 percent while paying their drivers the same.

Company A is no longer competitive.

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Dylan16807 6 hours ago | parent [-]

The debt company B took on to buy those new taxis means they're no longer competitive either if they undercut by 5%.

The scenario doesn't add up.

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iancmceachern 5 hours ago | parent [-]

But Company A also took on debt for theirs, so that's a wash. You assume only one of them has debt to service?

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Dylan16807 5 hours ago | parent [-]

Both companies bought a set of taxis in the past. Presumably at the same time if we want this comparison to be easy to understand.

If company A still has debt from that, company B has that much debt plus more debt from buying a new set of taxis.

Refreshing your equipment more often means that you're spending more per year on equipment. If you do it too often, then even if the new equipment is better you lose money overall.

If company B wants to undercut company A, their advantage from better equipment has to overcome the cost of switching.

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iancmceachern 2 hours ago | parent [-]

You are assuming something again.

They both refresh their equipment at the same rate.

	▲	Dylan16807 an hour ago \| parent [-]
		> They both refresh their equipment at the same rate. I wish you'd said that upfront. Especially because the comment you replied to was talking about replacing at different rates. So your version, if company A and B are refreshing at the same rate, then that means six months before B's refresh company A had the newer taxis. You implied they were charging similar amounts at that point, so company A was making bigger profits, and had been making bigger profits for a significant time. So when company B is able to cut prices 5%, company A can survive just fine. They don't need to rush into a premature upgrade that costs a ton of money, they can upgrade on their normal schedule. TL;DR: six months ago company B was "no longer competitive" and they survived. The companies are taking turns having the best tech. It's fine.