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Yes, though in some cases the safety is only marketing fluff and cutting corners actually doesn’t contribute to any reduction in safety. A safety arbitrage pla
by matte_black 9y ago
Yes, though in some cases the safety is only marketing fluff and cutting corners actually doesn’t contribute to any reduction in safety.
A safety arbitrage play means a company is attempting to turn a profit by selling a cheaper asset deemed unsafe at the same price as a safe one or a bit less.
If the unsafe asset is actually as 100% safe as the safe one, then they have played a valid arbitrage.
If the unsafe asset however is actually unsafe, then they are running a scam.
It’s a pretty common play in some developing economies.
- dredmorbius 9y agoThere's also survivor bias. If 10 firms start out, and 1 survives to profitability, that single firm's P/L will show gains, but the industry net won't. That's not true profit, but a probabilistic artefact of essentially winning a sequence of bets. There may also be gains possible if the survivor can increase scale of operations and/or start mitigating risks that smaller players cannot. This is another path to monopoly advantage that is based, again, on effectively winning early chance-based trials, and then ratcheting in an ever-larger risk advantage as compared to smaller players.