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> Go around to all the customers and tell them you'll sell to them for $25 tomorrow if they agree to a long-term contract today to buy from you at that price.

> Go around to all the customers and tell them you'll sell to them for $25 tomorrow if they agree to a long-term contract today to buy from you at that price. This argument seems tenuous. I see the customer's risk. Where is your risk? A source with details of this argument would also help. If you have are an economist, please mention it - I'll take the argument more seriously on your say-so.

rendall 5y ago
What's the risk to the customer? They get a $25 thing tomorrow or they pay the normal price.
- midasuni 5y ago
  They go bust as the cartel drops to $20, so the company locked into $25 is paying over the odds compared to competitors
AnthonyMouse 5y ago
> This argument seems tenuous. I see the customer's risk. Where is your risk? The purpose of the contract is to reduce your risk. The original problem was that if you built the factory intending to sell for $25, the incumbents could reduce the price to $20 or $15, i.e. below your cost. Then you could never recover your initial investment and the high probability of that happening would deter you from entering the market to begin with. The customer takes the risk because if you don't enter the market, they're paying $40 to the incumbents. > If you have are an economist, please mention it - I'll take the argument more seriously on your say-so. Professional economists have a reputation that compares disfavorably with psychics and astrologers. If an economist gives you your horoscope, make sure to get a second opinion. If the second opinion is from another economist, expect it to be different. "The track record of economists in predicting events is monstrously bad. It is beyond simplification; it is like medieval medicine." -Nassim Nicholas Taleb
- jquery 5y ago
  Companies hire economists and pay them handsomely. They do no such thing with psychics or astrologers. So the market sees value in economists.
  - AnthonyMouse 5y ago
    The sector employing the largest number of economists is universities. The second largest is banks. Banks are the things that keep blowing up the economy.

rendall 5y ago

What's the risk to the customer? They get a $25 thing tomorrow or they pay the normal price.

midasuni 5y ago
They go bust as the cartel drops to $20, so the company locked into $25 is paying over the odds compared to competitors

AnthonyMouse 5y ago

> This argument seems tenuous. I see the customer's risk. Where is your risk? The purpose of the contract is to reduce your risk. The original problem was that if you built the factory intending to sell for $25, the incumbents could reduce the price to $20 or $15, i.e. below your cost. Then you could never recover your initial investment and the high probability of that happening would deter you from entering the market to begin with. The customer takes the risk because if you don't enter the market, they're paying $40 to the incumbents. > If you have are an economist, please mention it - I'll take the argument more seriously on your say-so. Professional economists have a reputation that compares disfavorably with psychics and astrologers. If an economist gives you your horoscope, make sure to get a second opinion. If the second opinion is from another economist, expect it to be different. "The track record of economists in predicting events is monstrously bad. It is beyond simplification; it is like medieval medicine." -Nassim Nicholas Taleb

jquery 5y ago
Companies hire economists and pay them handsomely. They do no such thing with psychics or astrologers. So the market sees value in economists.
- AnthonyMouse 5y ago
  The sector employing the largest number of economists is universities. The second largest is banks. Banks are the things that keep blowing up the economy.