Competition: A New Stand Next Door

Lucy is twelve years old. She lives in Riverton with her parents and her brothers, Jack and Max. One Monday morning, Lucy walks down Main Street with Grandma Rose. Across the street from Rose's Bakery, there is a new shop with a bright blue sign and fresh paint. The sign says "Corner Loaf."

Lucy says, "Grandma, is that a bakery?"

Grandma nods slowly. She says, "It is. And on the first day, they sell bread for $2."

Rose's Bakery sells bread for $3. By noon, Lucy sees fewer customers than usual. A few people walk across the street and come back with a bag from the new shop.

That evening, at the kitchen table, Grandma looks worried. Lucy says, "Grandma, don't worry. What if we make flyers?"

Grandma says, "What would we write on them?"

Lucy says, "The things that make Rose's special."

Grandma looks at the empty chairs near the window. For many years, the same families have bought their bread here every Saturday. She does not want to lose them.

Competition

Rose's Bakery and Corner Loaf are now in competition, because they sell similar goods to the same customers. Each shop wants customers to choose it. A shop can compete in several ways. It can lower its price, improve its quality, offer better service, or advertise, which means telling people about its products.

Lucy and Grandma make a list.

Competition has a benefit for customers. They have more choices, they pay lower prices, and the shops try harder. But it makes things harder for sellers, because they must work harder to keep their customers.

Back to Main Street

Grandma decides to keep the price at $3, but she lowers it to $2.50 on Mondays and Wednesdays. On the flyers, Lucy draws a loaf of bread and writes, "Baked fresh every morning since 1990." Lucy and Max give them out on the sidewalk.

After two weeks, Corner Loaf raises its price to $2.50, because its bread costs more to make than it first thought. Rose's regular customers return. Some customers go to both shops.

Grandma says, "The new bakery made us think harder about what we do well."

Lucy smiles. She says, "It also gave customers more choices."