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But how do you fight against profiteering we saw in the beginning with Amazon resellers of PPE. They would scour stores, creating scarcity, then resell at large

by ivalm 7y ago

But how do you fight against profiteering we saw in the beginning with Amazon resellers of PPE. They would scour stores, creating scarcity, then resell at large profit to the same people who would normally buy from the very same stores that the profiteers emptied out. Heck this is the reason we don’t have onion futures in the commodity market. People corner markets under stress and profiteer without adding any efficiency or price discovery.

mhb 7y ago
If there was a market clearing amount of PPE, the situation you describe wouldn't exist. In order to be in a situation in which there is that amount of PPE requires allowing the price to rise when it is needed most. This will incentivize building extra manufacturing capacity and/or storing the goods for those times. Controlling prices leads to shortages/rationing. Regarding the onion futures: I don't know the story behind that, but there are plenty of commodity futures traded for commodities which you'd expect to have less physical product than onions. Like mustard seed, guar gum, coriander, etc.
- specialist 7y ago
  Thank you for following up. That video is ok primer for price discovery, substitution. I'm not an economist, so I don't know how to articulate my questions. The idea knocking around my head is to create some kind of insurance to address supply arbitrage situations. Our nations have strategic reserves for many commodities (oil, cheese, whatever). How do policy makers figure out proper amounts? Whatever that calculus, can we generalize it? Some way to extend NPV to account for risk and volatility. Surely this must already exist. A- My go to example are the chip supplies. IIRC, a tsunami wiped out the production in Thailand. Seems to me some customers would have paid a small premium to better weather supply shocks. But I don't know what that'd look like. C- What to do about hoarding? I've been stuck on ticket scalping for a while, which is my analog for today's PPE. Obvious remedy is to increase supply. But it doesn't happen. Another analog is famines are generally caused by hoarding, not lack of supply. Of course, a lot of current woes are because key people ignored the early warnings, and then messed with the production and supply. I don't know how to counter balance those two phenomenon. Thanks again.

by ivalm 7y ago

mhb 7y ago

If there was a market clearing amount of PPE, the situation you describe wouldn't exist. In order to be in a situation in which there is that amount of PPE requires allowing the price to rise when it is needed most. This will incentivize building extra manufacturing capacity and/or storing the goods for those times. Controlling prices leads to shortages/rationing. Regarding the onion futures: I don't know the story behind that, but there are plenty of commodity futures traded for commodities which you'd expect to have less physical product than onions. Like mustard seed, guar gum, coriander, etc.

specialist 7y ago
Thank you for following up. That video is ok primer for price discovery, substitution. I'm not an economist, so I don't know how to articulate my questions. The idea knocking around my head is to create some kind of insurance to address supply arbitrage situations. Our nations have strategic reserves for many commodities (oil, cheese, whatever). How do policy makers figure out proper amounts? Whatever that calculus, can we generalize it? Some way to extend NPV to account for risk and volatility. Surely this must already exist. A- My go to example are the chip supplies. IIRC, a tsunami wiped out the production in Thailand. Seems to me some customers would have paid a small premium to better weather supply shocks. But I don't know what that'd look like. C- What to do about hoarding? I've been stuck on ticket scalping for a while, which is my analog for today's PPE. Obvious remedy is to increase supply. But it doesn't happen. Another analog is famines are generally caused by hoarding, not lack of supply. Of course, a lot of current woes are because key people ignored the early warnings, and then messed with the production and supply. I don't know how to counter balance those two phenomenon. Thanks again.