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Knowing the max someone was willing to pay could help an actor set their prices optimally where there is no competition. Where there is competition, setting pri

by tmerr 7y ago

Knowing the max someone was willing to pay could help an actor set their prices optimally where there is no competition. Where there is competition, setting price to the max someone is willing to pay could drop overall profits since a competitor would happily undercut. So it does not change the rules of the game. Companies already price by predicting what people are willing to pay, by theory and experimentation. I wouldn't expect them having perfect information change much other than quicker convergence to the prices they would set anyway.

stereolambda 7y ago
But does that guarantee that the prices won't increase proportionally to your income? Companies are incentivized to make you buy stuff, not to make you motivated to make money.
- deleted 7y ago
  [deleted]
sagarm 7y ago
With only two competitors here, there'll be plenty of producer surplus I'm sure.
lerouxmlr 7y ago
yeah, agree fully with this. seems like a grey legit way of squeezing people for more money based on their normal day run indulgences.
ldoughty 7y ago
Except corporations have already agreed to not seriously undercut each other... Geographic monopoly, understood collaborative price hikes... Forced plan changes post-capture that eliminate the most common plan and squeeze out an extra $5 per customer.... Simply having another player in the field is not competition, despite the federal government's claims.
- AnthonyMouse 7y ago
  That effectively requires a cartel with high barriers to entry, otherwise not doing that is an immediate competitive advantage to any new challengers. It's pretty hard to build your own last mile telecommunications network, how hard is it to build a ride sharing app?
  - zonidjan 7y ago
    It's not hard to build a ride sharing app. It is, however, hard to get drivers and customers FOR your ride sharing app.
    - AnthonyMouse 7y ago
      Not if you can undercut the existing ones on price.
      - eric-hu 7y ago
        A ride sharing app is a dual marketplace. If you're cutting the price for riders past a point, you're cutting the pay for drivers.
        AnthonyMouse 7y ago
        That's assuming the incumbents are giving the premium for those customers to the drivers. But even if they were, the drivers are in a competitive labor market. If you get the customers with lower prices then you can also get the drivers because they'd rather be working for your rate than not at all.
        zonidjan 7y ago
        But you will never get customers without drivers and you will never get drivers without customers. Plenty of Uber/Lyft competitors have tried and failed. Heck, a few different companies tried here in Austin once we grew a spine and banned Uber/Lyft, only to die as soon as they came back to town.
wutbrodo 7y ago
It's not that hard to (legally) collude on something like this, especially with an effectively-two-participant field, the way Uber and Lyft are in many markets. It's one of the basic solutions to the iterated prisoner's dilemma (though it's by no means guaranteed).
WalterBright 7y ago
> Companies already price by predicting what people are willing to pay So does anyone else who is doing work. For example, have a contractor come by your home to give an estimate on roof repair. It'll be highly dependent on him sizing up you and what you can apparently afford.
- Spooky23 7y ago
  That’s where the invisible hand comes in and having functional markets matters. The difficulty in sustainably operating is also a demonstration of why heavily regulated taxis existed. When I had my roof replaced, estimates ranged from $12,000 to $75,000. We got 11 bids and paid $14k. That’s market forces at work, but also an example of a market without high capital costs.
  - denimnerd42 7y ago
    those probably weren't all the same product though? like impact resistance shingles with an air gapped radiant barrier layed down with a ventilated roof line and all that fancy stuff is certainly going to cost more than generic shingles over tar paper.
    - brianwawok 7y ago
      My bids on my roof were 6k to 54k. The 54k bid included a whole house energy audit with positive pressure tests and some stupid stuff. The bids from 6k to 32k were for the same literal shingles (architectural ) with the same installation and the same tear off and the same warranty. The one pattern I noticed was the bids over 25k showed me a video with company values. (One talked about how Christian the owners were) The bids under 25k I got like a 5 minute explanation and a chance to ask questions. Think I spent like 7k on the roof and it’s great.
    - Spooky23 7y ago
      Nope. I gave them a bill of materials for apples to apples offers!
6gvONxR4sf7o 7y ago
If there were an ability to resell on a secondary market it'd probably level out like you say. If you sell me something at a super low price, I can turn around and resell it for a typical price, which would usually level this out (effectively being more players in the market). But with todays "everything is a service" market with 50 pages of terms and conditions, it doesn't work.

by tmerr 7y ago

stereolambda 7y ago

But does that guarantee that the prices won't increase proportionally to your income? Companies are incentivized to make you buy stuff, not to make you motivated to make money.

deleted 7y ago
[deleted]

sagarm 7y ago

With only two competitors here, there'll be plenty of producer surplus I'm sure.

lerouxmlr 7y ago

yeah, agree fully with this. seems like a grey legit way of squeezing people for more money based on their normal day run indulgences.

ldoughty 7y ago

Except corporations have already agreed to not seriously undercut each other... Geographic monopoly, understood collaborative price hikes... Forced plan changes post-capture that eliminate the most common plan and squeeze out an extra $5 per customer.... Simply having another player in the field is not competition, despite the federal government's claims.

AnthonyMouse 7y ago
That effectively requires a cartel with high barriers to entry, otherwise not doing that is an immediate competitive advantage to any new challengers. It's pretty hard to build your own last mile telecommunications network, how hard is it to build a ride sharing app?
- zonidjan 7y ago
  It's not hard to build a ride sharing app. It is, however, hard to get drivers and customers FOR your ride sharing app.
  - AnthonyMouse 7y ago
    Not if you can undercut the existing ones on price.
    - eric-hu 7y ago
      A ride sharing app is a dual marketplace. If you're cutting the price for riders past a point, you're cutting the pay for drivers.
      - AnthonyMouse 7y ago
        That's assuming the incumbents are giving the premium for those customers to the drivers. But even if they were, the drivers are in a competitive labor market. If you get the customers with lower prices then you can also get the drivers because they'd rather be working for your rate than not at all.
        zonidjan 7y ago
        But you will never get customers without drivers and you will never get drivers without customers. Plenty of Uber/Lyft competitors have tried and failed. Heck, a few different companies tried here in Austin once we grew a spine and banned Uber/Lyft, only to die as soon as they came back to town.

wutbrodo 7y ago

It's not that hard to (legally) collude on something like this, especially with an effectively-two-participant field, the way Uber and Lyft are in many markets. It's one of the basic solutions to the iterated prisoner's dilemma (though it's by no means guaranteed).

WalterBright 7y ago

> Companies already price by predicting what people are willing to pay So does anyone else who is doing work. For example, have a contractor come by your home to give an estimate on roof repair. It'll be highly dependent on him sizing up you and what you can apparently afford.

Spooky23 7y ago
That’s where the invisible hand comes in and having functional markets matters. The difficulty in sustainably operating is also a demonstration of why heavily regulated taxis existed. When I had my roof replaced, estimates ranged from $12,000 to $75,000. We got 11 bids and paid $14k. That’s market forces at work, but also an example of a market without high capital costs.
- denimnerd42 7y ago
  those probably weren't all the same product though? like impact resistance shingles with an air gapped radiant barrier layed down with a ventilated roof line and all that fancy stuff is certainly going to cost more than generic shingles over tar paper.
  - brianwawok 7y ago
    My bids on my roof were 6k to 54k. The 54k bid included a whole house energy audit with positive pressure tests and some stupid stuff. The bids from 6k to 32k were for the same literal shingles (architectural ) with the same installation and the same tear off and the same warranty. The one pattern I noticed was the bids over 25k showed me a video with company values. (One talked about how Christian the owners were) The bids under 25k I got like a 5 minute explanation and a chance to ask questions. Think I spent like 7k on the roof and it’s great.
  - Spooky23 7y ago
    Nope. I gave them a bill of materials for apples to apples offers!

6gvONxR4sf7o 7y ago

If there were an ability to resell on a secondary market it'd probably level out like you say. If you sell me something at a super low price, I can turn around and resell it for a typical price, which would usually level this out (effectively being more players in the market). But with todays "everything is a service" market with 50 pages of terms and conditions, it doesn't work.