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> And the upside is mandatory licensing fees for every Android device. Sorry, how could that be an upside? It's plain, zero-sum rent-seeking. I.e. only an upsi

> And the upside is mandatory licensing fees for every Android device. Sorry, how could that be an upside? It's plain, zero-sum rent-seeking. I.e. only an upside if you happen to collect the rent.

paulddraper 8y ago
I.e. an upside for Oracle.
- Zanni 8y ago
  Exactly. Just pointing out the rationale for Oracle, not arguing the merits.
  - YjSe2GMQ 8y ago
    Yeah, sorry, my bad.
deleted 8y ago
[deleted]
thaumasiotes 8y ago
> It's plain, zero-sum rent-seeking. It is zero-sum iff the benefit to Oracle is exactly equal to the deadweight loss imposed by the tax. I tried to calculate this in the simplest econ 101 way, and got a surprising result. I would appreciate someone else commenting... Assume that the schedule of supply and the schedule of demand are straight lines. We have three groups: (1) purchasers of phones; (2) vendors of phones; (3) Oracle. In the absence of a tax imposed by Oracle, an equilibrium quantity Q_e of phones trade at an equilibrium price P_e. [1] This generates gains from trade, producer and consumer surplus, equal to the area circumscribed by the schedule of supply, the schedule of demand, and the line Q = 0. When Oracle imposes a fee on phone sales of value F, the price and quantity-traded of phones adjust. The new quantity traded Q_f is lower than Q_e, and the new price P_f is higher than P_e. The gains from trade are now the trapezoid circumscribed by the line Q = 0, the line Q = Q_f, the supply schedule, and the demand schedule. The missing gains, the deadweight loss, are equal to the triangle circumscribed by the line Q = Q_f, the supply schedule, and the demand schedule. Oracle receives F×Q_f in fees, a benefit equal to F×Q_f. The deadweight loss is a triangle with base F and height (Q_e - Q_f). It is therefore equal to (F×Q_e - F×Q_f)/2. Balancing the gains to Oracle against the deadweight loss, we see that they are equal when Q_f is one third of Q_e, or in other words when the fee is so massive that it cuts the quantity traded by 66%. If Q_f is larger than that, the benefits to Oracle exceed the loss imposed on purchasers and vendors. This result would seem to imply that we could improve the efficiency of the marketplace by allowing random third parties to impose large taxes on pretty much any good. This is hard to believe. Where did I go wrong? [1] In reality, there are a variety of models available at a variety of price points. This doesn't affect the problem I have with my result, though it is probably relevant to the phone market in specific.
- wbl 8y ago
  If the fee is per phone it adjusts the supply schedule by moving it towards a lower quantity as a higher consumer price is required to compensate the producers at the same amount.
  - thaumasiotes 8y ago
    The schedule doesn't change. The quantity traded does, but I mentioned that: > When Oracle imposes a fee on phone sales of value F, the price and quantity-traded of phones adjust. The new quantity traded Q_f is lower than Q_e, and the new price P_f is higher than P_e.
- 34624523 8y ago
  The deadweight loss is the net loss to the combined system (producers, consumers, and oracle leech). So if the total surplus of the system was X, and the deadweight loss was (F×Q_e - F×Q_f)/2, the total surplus of the system with oracle is (X - ((F×Q_e - F×Q_f)/2)). This is less than X. The producers/consumers combined would lose both the oracle tax and the deadweight loss (lack of opportunities that otherwise would have occured).
- bananamulch 8y ago
  The loss to consumers and producers combined is both the oracle tax and the deadweight loss. So the lack of efficiency is measured by the deadweight loss, and the optimal amount of deadweight loss is 0. But then again, what if phones have a negative externality from a society where no one talks to eachother? The oracle tax might be good for society.
- AnthonyMouse 8y ago
  > Where did I go wrong? You inverted the sign. The zero sum thing is the prospective transfer to Oracle. If you pay $100 and Oracle receives $100, net across everyone is zero. Then whatever lack of commerce caused by the higher prices occurs is a deadweight loss with negative sum. You start from zero and go down. To get a positive sum you need to be creating something with value greater than its creation cost.
bananamulch 8y ago
It's certainly a downside for society, because there are people who otherwise would have purchased android phones that can't afford them because of the oracle tax.
- toyg 8y ago
  “More phones” is not necessarily good “for society”. For the economy, maybe. The two concepts are not the same.

> And the upside is mandatory licensing fees for every Android device. Sorry, how could that be an upside? It's plain, zero-sum rent-seeking. I.e. only an upside if you happen to collect the rent.

paulddraper 8y ago

I.e. an upside for Oracle.

Zanni 8y ago
Exactly. Just pointing out the rationale for Oracle, not arguing the merits.
- YjSe2GMQ 8y ago
  Yeah, sorry, my bad.

deleted 8y ago

[deleted]

thaumasiotes 8y ago

> It's plain, zero-sum rent-seeking. It is zero-sum iff the benefit to Oracle is exactly equal to the deadweight loss imposed by the tax. I tried to calculate this in the simplest econ 101 way, and got a surprising result. I would appreciate someone else commenting... Assume that the schedule of supply and the schedule of demand are straight lines. We have three groups: (1) purchasers of phones; (2) vendors of phones; (3) Oracle. In the absence of a tax imposed by Oracle, an equilibrium quantity Q_e of phones trade at an equilibrium price P_e. [1] This generates gains from trade, producer and consumer surplus, equal to the area circumscribed by the schedule of supply, the schedule of demand, and the line Q = 0. When Oracle imposes a fee on phone sales of value F, the price and quantity-traded of phones adjust. The new quantity traded Q_f is lower than Q_e, and the new price P_f is higher than P_e. The gains from trade are now the trapezoid circumscribed by the line Q = 0, the line Q = Q_f, the supply schedule, and the demand schedule. The missing gains, the deadweight loss, are equal to the triangle circumscribed by the line Q = Q_f, the supply schedule, and the demand schedule. Oracle receives F×Q_f in fees, a benefit equal to F×Q_f. The deadweight loss is a triangle with base F and height (Q_e - Q_f). It is therefore equal to (F×Q_e - F×Q_f)/2. Balancing the gains to Oracle against the deadweight loss, we see that they are equal when Q_f is one third of Q_e, or in other words when the fee is so massive that it cuts the quantity traded by 66%. If Q_f is larger than that, the benefits to Oracle exceed the loss imposed on purchasers and vendors. This result would seem to imply that we could improve the efficiency of the marketplace by allowing random third parties to impose large taxes on pretty much any good. This is hard to believe. Where did I go wrong? [1] In reality, there are a variety of models available at a variety of price points. This doesn't affect the problem I have with my result, though it is probably relevant to the phone market in specific.

wbl 8y ago
If the fee is per phone it adjusts the supply schedule by moving it towards a lower quantity as a higher consumer price is required to compensate the producers at the same amount.
- thaumasiotes 8y ago
  The schedule doesn't change. The quantity traded does, but I mentioned that: > When Oracle imposes a fee on phone sales of value F, the price and quantity-traded of phones adjust. The new quantity traded Q_f is lower than Q_e, and the new price P_f is higher than P_e.
34624523 8y ago
The deadweight loss is the net loss to the combined system (producers, consumers, and oracle leech). So if the total surplus of the system was X, and the deadweight loss was (F×Q_e - F×Q_f)/2, the total surplus of the system with oracle is (X - ((F×Q_e - F×Q_f)/2)). This is less than X. The producers/consumers combined would lose both the oracle tax and the deadweight loss (lack of opportunities that otherwise would have occured).
bananamulch 8y ago
The loss to consumers and producers combined is both the oracle tax and the deadweight loss. So the lack of efficiency is measured by the deadweight loss, and the optimal amount of deadweight loss is 0. But then again, what if phones have a negative externality from a society where no one talks to eachother? The oracle tax might be good for society.
AnthonyMouse 8y ago
> Where did I go wrong? You inverted the sign. The zero sum thing is the prospective transfer to Oracle. If you pay $100 and Oracle receives $100, net across everyone is zero. Then whatever lack of commerce caused by the higher prices occurs is a deadweight loss with negative sum. You start from zero and go down. To get a positive sum you need to be creating something with value greater than its creation cost.

bananamulch 8y ago

It's certainly a downside for society, because there are people who otherwise would have purchased android phones that can't afford them because of the oracle tax.

toyg 8y ago
“More phones” is not necessarily good “for society”. For the economy, maybe. The two concepts are not the same.