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in functional, competitive markets, you'd have a range of segmentation between price competition and quality competition (i.e., various differentiation strategi

in functional, competitive markets, you'd have a range of segmentation between price competition and quality competition (i.e., various differentiation strategies for diverse segments, not just one luxury segment). our markets are far from functional and competitive however, and we've let them consolidate in scope, power, and regulatory capture for far too long.

wazoox 6y ago
Do functional, competitive markets really exist? The true nature of markets doesn't seem to be equilibrium, but brutal swings between various local optima (which generally are pretty mediocre overall).
- MichaelZuo 6y ago
  This, the existence of Nash equilibria is practically guaranteed according to game theory. And of course switching implies frictional costs, activation energy, and so on in addition to the actual change. If we define “functional, competitive markets” to mean no strange equilibriums then they certainly don’t exist on this planet.
  - Karrot_Kream 6y ago
    > This, the existence of Nash equilibria Additionally there are a lot of assumptions that go into proving that markets have Nash equilibria, such as convex utility functions, and perfect information, which is often not true in reality.
- clairity 6y ago
  markets are dynamic, but not so chaotic to swing brutally (among attractors), as you put it. certainly some markets are in that stage now, but certainly not all or even most. early on, markets tend to grow to an unsustainable number of participants, and then as participants figure out marketing and their own strengths and fits, they start to whittle down. in the best markets (for consumers; but that are also sustainable for providers), you'd have maybe tens of competitors (i.e., not 3 or 300), depending on market characteristics (like being capital-intensive or not, free cash flow restricted or not, etc.). the problem with our markets is that we've long given up on providing the right amount of regulation to maintain that consumer-optimum, which can be stable in isolation, but for which the highly dynamic politico-social context often destabilizes. so it takes work and vigilence to maintain the optimum, and we don't have that in most (all?) markets.
edmundsauto 6y ago
Would a healthy market necessarily lead to incrementally ratcheted price/quality points? Seems like the barbell distribution has advantages (simplicity, plus reflecting the decline of the middle class that buys “somewhat nice” items).
- clairity 6y ago
  that's a matter of definition i guess, but i'd say mostly yes, as a few competitors will go for a cost strategy, while others will differentiate. a decent (but not perfect) example is the laptop market. you have lenovo, hp, dell, acer, msi, asus, etc. mostly pursuing a cost strategy, with some differentiation efforts at the tops of their product lines, while apple (and perhaps razer) pursues a differentiation strategy. then you have a bunch of no-name companies also competing on price. you can buy a laptop for as little as a hundred bucks, all the way up to $5000 (and more).
treeman79 6y ago
Russian president was impressed and frightened by a grocery store. https://www.nhregister.com/neighborhood/bayarea/news/article/When-Boris-Yeltsin-went-grocery-shopping-in-Clear-5759129.php https://www.nhregister.com/neighborhood/bayarea/news/article... Russian might pilot stole a jet and came to America. For a time be thought grocery stores were fake American propaganda. He traveled the country to find out why we had so much. https://www.amazon.com/Mig-Pilot-Final-Escape-Belenko/dp/0380538687 https://www.amazon.com/Mig-Pilot-Final-Escape-Belenko/dp/038... Our capitalist system produced so much food that socialist countries thought it all fake propaganda.
barrkel 6y ago
Segmentation only works in ways that the market structure permits. For example it's practically impossible for a supermarket to do very good fresh bread; "fresh" supermarket bread is normally delivered frozen part baked and there isn't margin for much labour beyond schlepping things in and out of ovens, slicers and baggers. The bread you get at the start of a meal in a fine dining restaurant, baked from scratch in the kitchen? Never going to come close. Most "luxury" products are a big marketing spend, combined with an emphasis on components and finish the customer can notice easily, ideally by sight. For things where consistency is more important than specificity, this works ok. For example, you almost always want the mass market engine, not the bespoke one tuned by the artisan mechanic. I don't think it's nearly as true for food.
- clairity 6y ago
  yes, that's why we need to make sure our politico-economic policies shape the structures of markets to promote fair competition. but your example of a market (for bread? or food?) doesn't seem to exemplify structure limiting segmentation. you can buy bread all along the range of price and quality, from mass-produced wonder bread to the local mass bakery (labrea bakery in LA comes to mind) to the freshly handcrafted loaf (at restaurants and artisan bread shops). one layer deeper, favoring fair and free markets really means that we should favor markets that have mostly small and mid-sized compettitors and entirely eschew large ($100MM+) corporations where the paradox of abundance applied to scale (relative to the individual) turns employees inwards toward harvesting the abundance for themselves rather than toward serving the market, and where economies of scale and scope wane in most markets.

wazoox 6y ago

Do functional, competitive markets really exist? The true nature of markets doesn't seem to be equilibrium, but brutal swings between various local optima (which generally are pretty mediocre overall).

MichaelZuo 6y ago
This, the existence of Nash equilibria is practically guaranteed according to game theory. And of course switching implies frictional costs, activation energy, and so on in addition to the actual change. If we define “functional, competitive markets” to mean no strange equilibriums then they certainly don’t exist on this planet.
- Karrot_Kream 6y ago
  > This, the existence of Nash equilibria Additionally there are a lot of assumptions that go into proving that markets have Nash equilibria, such as convex utility functions, and perfect information, which is often not true in reality.
clairity 6y ago
markets are dynamic, but not so chaotic to swing brutally (among attractors), as you put it. certainly some markets are in that stage now, but certainly not all or even most. early on, markets tend to grow to an unsustainable number of participants, and then as participants figure out marketing and their own strengths and fits, they start to whittle down. in the best markets (for consumers; but that are also sustainable for providers), you'd have maybe tens of competitors (i.e., not 3 or 300), depending on market characteristics (like being capital-intensive or not, free cash flow restricted or not, etc.). the problem with our markets is that we've long given up on providing the right amount of regulation to maintain that consumer-optimum, which can be stable in isolation, but for which the highly dynamic politico-social context often destabilizes. so it takes work and vigilence to maintain the optimum, and we don't have that in most (all?) markets.

edmundsauto 6y ago

Would a healthy market necessarily lead to incrementally ratcheted price/quality points? Seems like the barbell distribution has advantages (simplicity, plus reflecting the decline of the middle class that buys “somewhat nice” items).

clairity 6y ago
that's a matter of definition i guess, but i'd say mostly yes, as a few competitors will go for a cost strategy, while others will differentiate. a decent (but not perfect) example is the laptop market. you have lenovo, hp, dell, acer, msi, asus, etc. mostly pursuing a cost strategy, with some differentiation efforts at the tops of their product lines, while apple (and perhaps razer) pursues a differentiation strategy. then you have a bunch of no-name companies also competing on price. you can buy a laptop for as little as a hundred bucks, all the way up to $5000 (and more).

treeman79 6y ago

Russian president was impressed and frightened by a grocery store. https://www.nhregister.com/neighborhood/bayarea/news/article/When-Boris-Yeltsin-went-grocery-shopping-in-Clear-5759129.php https://www.nhregister.com/neighborhood/bayarea/news/article... Russian might pilot stole a jet and came to America. For a time be thought grocery stores were fake American propaganda. He traveled the country to find out why we had so much. https://www.amazon.com/Mig-Pilot-Final-Escape-Belenko/dp/0380538687 https://www.amazon.com/Mig-Pilot-Final-Escape-Belenko/dp/038... Our capitalist system produced so much food that socialist countries thought it all fake propaganda.

barrkel 6y ago

Segmentation only works in ways that the market structure permits. For example it's practically impossible for a supermarket to do very good fresh bread; "fresh" supermarket bread is normally delivered frozen part baked and there isn't margin for much labour beyond schlepping things in and out of ovens, slicers and baggers. The bread you get at the start of a meal in a fine dining restaurant, baked from scratch in the kitchen? Never going to come close. Most "luxury" products are a big marketing spend, combined with an emphasis on components and finish the customer can notice easily, ideally by sight. For things where consistency is more important than specificity, this works ok. For example, you almost always want the mass market engine, not the bespoke one tuned by the artisan mechanic. I don't think it's nearly as true for food.

clairity 6y ago
yes, that's why we need to make sure our politico-economic policies shape the structures of markets to promote fair competition. but your example of a market (for bread? or food?) doesn't seem to exemplify structure limiting segmentation. you can buy bread all along the range of price and quality, from mass-produced wonder bread to the local mass bakery (labrea bakery in LA comes to mind) to the freshly handcrafted loaf (at restaurants and artisan bread shops). one layer deeper, favoring fair and free markets really means that we should favor markets that have mostly small and mid-sized compettitors and entirely eschew large ($100MM+) corporations where the paradox of abundance applied to scale (relative to the individual) turns employees inwards toward harvesting the abundance for themselves rather than toward serving the market, and where economies of scale and scope wane in most markets.