5 ms·

Probably lack of business imagination on my part, so can you explain a situation where a company would be forced to do something that would lose it money? If y

Probably lack of business imagination on my part, so can you explain a situation where a company would be forced to do something that would lose it money? If you agree to a deal you must be getting some benefit out of it, right?

sho 9y ago
> If you agree to a deal you must be getting some benefit out of it, right? Well I suppose they get to enjoy the benefit of not simply going out of business. The sharecropper working the land for his fief lord gets "some benefit" out of it, yes, in that he and his family get to eat and thus live. That doesn't make it a good situation.
CPLX 9y ago
Sure. Suppose you live on a sunny carribean island and own a banana plantation and sell bananas for export profitably every year and live a normal life and raise a family. Then someone comes along and creates a shipping trust and corners the market on boats leaving the island and says sell your bananas to me at a loss or leave them on the docks to rot. Option A is to sell them at less than the cost it took for you to pay your workers to harvest them, option B is to watch them rot in a matter of days. Yeah sure the free market says that this will cause someone else to come along and create a shipping alternative. But the shipping trust knows this too. So they say if anyone tries to compete with us we'll drop the cost of shipping off the island to free temporarily until your new shipping business fails, and then go back to high rates. Nobody will finance the new shipping company given this predicament, so they can't even get enough money together to buy a boat. Meanwhile, the trust is making a total killing selling bananas at premium prices while buying them below cost, rapidly building a war chest to permanently be able to outlast even a well funded upstart shipping competitor in a price war. Yes the "free market" should solve this problem but the whole point is that trusts and monopolies subvert the free market and prevent market forces from functioning. Thus the role of government in stopping them.
- icebraining 9y ago
  That sounds plausible in a world without contracts. But with them, the upstart will lock-in a few customers at a decent rate, which they will have to pay even when the big company drops theirs. A more plausible explanation here, in my humble opinion, is that it's only unprofitable for some of the suppliers. By squeezing the margins in the market, Amazon forces everyone except the leanest out.
  - CPLX 9y ago
    Not only is it plausible it's completely common. It's just a textbook description of how trusts work. The upstart can't lock in contracts when another well-funded monopoly company is engaging in predatory activities. The monopoly has market power which it can use to put competitors out of business and extort profits from suppliers. It's really just econ 101 and a pretty settled concept. Now there is certainly an argument to be made about the degree to which Amazon is actually doing this, but from a theoretical standpoint none of this is confusing at all, and there are numerous real world examples of this in action.
    - icebraining 9y ago
      I admit my ignorance. Can you give me one of those examples?
wallace_f 9y ago
The article mentions an example: >the JFTC found the firm had required suppliers sell items on Amazon Japan at the same or lower price as any listings they may have on on other platforms.

sho 9y ago

> If you agree to a deal you must be getting some benefit out of it, right? Well I suppose they get to enjoy the benefit of not simply going out of business. The sharecropper working the land for his fief lord gets "some benefit" out of it, yes, in that he and his family get to eat and thus live. That doesn't make it a good situation.

CPLX 9y ago

Sure. Suppose you live on a sunny carribean island and own a banana plantation and sell bananas for export profitably every year and live a normal life and raise a family. Then someone comes along and creates a shipping trust and corners the market on boats leaving the island and says sell your bananas to me at a loss or leave them on the docks to rot. Option A is to sell them at less than the cost it took for you to pay your workers to harvest them, option B is to watch them rot in a matter of days. Yeah sure the free market says that this will cause someone else to come along and create a shipping alternative. But the shipping trust knows this too. So they say if anyone tries to compete with us we'll drop the cost of shipping off the island to free temporarily until your new shipping business fails, and then go back to high rates. Nobody will finance the new shipping company given this predicament, so they can't even get enough money together to buy a boat. Meanwhile, the trust is making a total killing selling bananas at premium prices while buying them below cost, rapidly building a war chest to permanently be able to outlast even a well funded upstart shipping competitor in a price war. Yes the "free market" should solve this problem but the whole point is that trusts and monopolies subvert the free market and prevent market forces from functioning. Thus the role of government in stopping them.

icebraining 9y ago
That sounds plausible in a world without contracts. But with them, the upstart will lock-in a few customers at a decent rate, which they will have to pay even when the big company drops theirs. A more plausible explanation here, in my humble opinion, is that it's only unprofitable for some of the suppliers. By squeezing the margins in the market, Amazon forces everyone except the leanest out.
- CPLX 9y ago
  Not only is it plausible it's completely common. It's just a textbook description of how trusts work. The upstart can't lock in contracts when another well-funded monopoly company is engaging in predatory activities. The monopoly has market power which it can use to put competitors out of business and extort profits from suppliers. It's really just econ 101 and a pretty settled concept. Now there is certainly an argument to be made about the degree to which Amazon is actually doing this, but from a theoretical standpoint none of this is confusing at all, and there are numerous real world examples of this in action.
  - icebraining 9y ago
    I admit my ignorance. Can you give me one of those examples?

wallace_f 9y ago

The article mentions an example: >the JFTC found the firm had required suppliers sell items on Amazon Japan at the same or lower price as any listings they may have on on other platforms.