7 ms·
Not sure what you mean "manufacturers, not actual capacity constraints". The beauty of price signals is that they distill all the market information down to a s
by gwright 9y ago
Not sure what you mean "manufacturers, not actual capacity constraints". The beauty of price signals is that they distill all the market information down to a simple metric. It incorporates increased demand, decreased supply, availability of substitute products, predictions about the future and more.
A spike in prices is the best way to ensure that the supply is increased ASAP. The spike is a strong indication that the market wants more and it makes it more likely that suppliers will make decisions to satisfy that demand.
Higher prices allow companies to justify overtime, urgent delivery of supplies, rapid decision making on contracts (i.e. not shopping around) and so on.
- namlem 9y agoOr it was due to collusion in a niche controlled by a duopoly (WD and Seagate).
- gwright 9y agoAlso captured in the price signal. The higher price (in your example created via price collusion) is a signal to competitors to enter the market.
- charleslmunger 9y agoNot really, because the price increase sint actually due to real costs on Seagate/wd's side - everyone knows they will just drop prices if a competitor joins that's not part of the collusion. You'd be entering a market with huge startup costs, and once you'd ramped up production prices would drop and your margins would be razor thin.
- londons_explore 9y agoThe hard drive market is widely believed to die with the advent in solid state disks. With a huge capital cost to get into the market, no investor will put money into building new hard drive factories when it will probably be obsolete in 5 years.
- tw04 9y agoBecause you can just hop right into the HDD market? Are we pretending it wouldn't take tens of billions of dollars, 5+ years, and patents nobody is willing to sell or license?