5 ms·

One mechanism of preventing competition: You develop a portfolio of goods. For example, every medical tool a hospital would ever need. Over time, you develop e

One mechanism of preventing competition: You develop a portfolio of goods. For example, every medical tool a hospital would ever need. Over time, you develop economies of scale. Now you go to your client hospitals and say "hey, I'll give you a 10% discount if you sign this agreement to buy all your tools from us, and none from our competitors". Now you have successfully locked out anyone who can't provide an equivalent entire range of products. Someone comes up with a better/cheaper scalpel? Nope, can't compete, because if they bought the scalpel, the prices of everything else they buy would rise.

nickik 9y ago
There is no lack of ways to limit competition on certain items of course, the possibilities are endless. This is however not the same as limiting competition in a broader sense. What you describe just moves competition to a different level. Instead of competing on individual items you compete on a broader model of how to supply somebody if they need many goods. There are many different models possible (and many that we see in the real world) and these different models compete as much or more then competition for any individual items. Considering competition in your example, why should anybody sign a long run contract with these people if their are better offers for the majority of products or other companies who have a similar model. People are not stupid, they understand the potential of abuse when they sign such a contract and they will only do so if they benefit. If it is better to buy individually or from some company that bundles goods is always a important question for any business. How to make such compromises is what managers go to school for. Business that do such evaluation well will be more successful (as will the company who they selected). > Over time, you develop economies of scale. Basically you assumed away the hardest problem. How will they reach this massive scale for all these products? You basically said 'assume the problem is solved' and then 'see its not actually a problem'. There are tons of games companies play with bundling unbundling and a million other models that are in use in markets today. Not one of these model actually leads to significant centralisation if both parties are free to conduct business by switching to different models. Prices will not be significantly over equilibrium for a long time whatever models companies try to use. Competition is about hole systems of relations superiority over other system of relations. That how we find efficient large scale solutions, this is how Capitalism is able to find ways to improve efficiency even in already optimised system of production. Consider how many different ways there are for franchising, no one model has succeeded yet.
- vertex-four 9y ago
  > People are not stupid, they understand the potential of abuse when they sign such a contract and they will only do so if they benefit. Actually... usually by the time these contracts come back to bite companies, the entire staff responsible for them has usually been replaced. People are terrible at figuring out what the world will look like even 5, 10 years down the line, and doubly so when they're being pressured to save money by any means possible. If you're going to say that over timescales of 20, 50, 100 years, things eventually work out - sure. In the meantime, we get to sit in a variety of local maximas, like the one I suggested, or significantly more complex ones, and people are the worse off for it.
  - nickik 9y ago
    People are terrible at figuring out what the world will look like. The problem is just that the other side has the exact same problem of figuring out the future as you. If something is successful for 5-10 years then maybe it was not a stupid policy. Mistakes are a given in any human system, you might as well have cases where a company gives significant discounts to capture the hole market but then the end up losing money. One cases has a price lower then equilibrium for a while, the other a higher. Both parts of the contract have a huge intensives to get it right and both gain by finding a good level. I have never claimed the markets are perfect. They are not, the best you can do is an adaptive process that has good feedback. Also when discussing anti-trust we need to actually show that it is likely that it would actually improve on the situation. You are no longer taking about simply regulation, you are basically talking about the need for a super intelligent third party that could recognize local maximas and fix them, that is quite frankly impossible. Anti-Trust bureaucracies were drowning in complexity of even proving that a clear cut monopoly was actually doing anything bad. There are local maxima situation everywhere all the time. The market process constantly tries to move towards equilibrium and this is the only mechanism we know that is able to solve the coordination problem. In theory micro optimizations are possible but in practice there is absolutely no evidence that such micro optimizations from outside parties improve long term success, and there is lots of evidence that in many cases attempts at such regulation massively harmed people. Look at the Post-WW2 India when Indish Economist trained in Britain came over with the new socialist ideas where you would have a market but regulated it so that you had the optimal amount of competition and to prevent monopoly. This was probably the most extreme attempted at doing this sort of thing on systematic bases. The result were slow growth and 100s of millions of people not moving out of poverty. The bureaucracy followed its own interest and instead of fixing local maxima they fixed their pocketbooks.

nickik 9y ago

There is no lack of ways to limit competition on certain items of course, the possibilities are endless. This is however not the same as limiting competition in a broader sense. What you describe just moves competition to a different level. Instead of competing on individual items you compete on a broader model of how to supply somebody if they need many goods. There are many different models possible (and many that we see in the real world) and these different models compete as much or more then competition for any individual items. Considering competition in your example, why should anybody sign a long run contract with these people if their are better offers for the majority of products or other companies who have a similar model. People are not stupid, they understand the potential of abuse when they sign such a contract and they will only do so if they benefit. If it is better to buy individually or from some company that bundles goods is always a important question for any business. How to make such compromises is what managers go to school for. Business that do such evaluation well will be more successful (as will the company who they selected). > Over time, you develop economies of scale. Basically you assumed away the hardest problem. How will they reach this massive scale for all these products? You basically said 'assume the problem is solved' and then 'see its not actually a problem'. There are tons of games companies play with bundling unbundling and a million other models that are in use in markets today. Not one of these model actually leads to significant centralisation if both parties are free to conduct business by switching to different models. Prices will not be significantly over equilibrium for a long time whatever models companies try to use. Competition is about hole systems of relations superiority over other system of relations. That how we find efficient large scale solutions, this is how Capitalism is able to find ways to improve efficiency even in already optimised system of production. Consider how many different ways there are for franchising, no one model has succeeded yet.

vertex-four 9y ago
> People are not stupid, they understand the potential of abuse when they sign such a contract and they will only do so if they benefit. Actually... usually by the time these contracts come back to bite companies, the entire staff responsible for them has usually been replaced. People are terrible at figuring out what the world will look like even 5, 10 years down the line, and doubly so when they're being pressured to save money by any means possible. If you're going to say that over timescales of 20, 50, 100 years, things eventually work out - sure. In the meantime, we get to sit in a variety of local maximas, like the one I suggested, or significantly more complex ones, and people are the worse off for it.
- nickik 9y ago
  People are terrible at figuring out what the world will look like. The problem is just that the other side has the exact same problem of figuring out the future as you. If something is successful for 5-10 years then maybe it was not a stupid policy. Mistakes are a given in any human system, you might as well have cases where a company gives significant discounts to capture the hole market but then the end up losing money. One cases has a price lower then equilibrium for a while, the other a higher. Both parts of the contract have a huge intensives to get it right and both gain by finding a good level. I have never claimed the markets are perfect. They are not, the best you can do is an adaptive process that has good feedback. Also when discussing anti-trust we need to actually show that it is likely that it would actually improve on the situation. You are no longer taking about simply regulation, you are basically talking about the need for a super intelligent third party that could recognize local maximas and fix them, that is quite frankly impossible. Anti-Trust bureaucracies were drowning in complexity of even proving that a clear cut monopoly was actually doing anything bad. There are local maxima situation everywhere all the time. The market process constantly tries to move towards equilibrium and this is the only mechanism we know that is able to solve the coordination problem. In theory micro optimizations are possible but in practice there is absolutely no evidence that such micro optimizations from outside parties improve long term success, and there is lots of evidence that in many cases attempts at such regulation massively harmed people. Look at the Post-WW2 India when Indish Economist trained in Britain came over with the new socialist ideas where you would have a market but regulated it so that you had the optimal amount of competition and to prevent monopoly. This was probably the most extreme attempted at doing this sort of thing on systematic bases. The result were slow growth and 100s of millions of people not moving out of poverty. The bureaucracy followed its own interest and instead of fixing local maxima they fixed their pocketbooks.