New Capacity Destroys Its Own Price Forecast

“ADVICE: When new production is brought into any market, it is bound to cause severe price competition. No competitor is going to stand idly by and let his share ofmarket evaporate. All ourforecasts ofsales, profits, and prices had been made on the assumption that the $10 market price would continue even after our large production became available. Any businessman who overlooks the effect of competitors 3 price reductions when enormous new capacity is added to the market, will have a rude awakening. It is impossible to start a new op- eration like Mass lite and throw many tons of capacity on the market without creating an uncontrollable price situation. The Masslite investment was a disaster.”

“ADVICE: For hundreds ofyears almost every generation has been tempted by greed to overspeculate in some promising new venture. When too much capital enters any new field prices rise too fast and disaster ensues. For example: South Sea Bubble Holland Tulip Boom”