3 ms·

That only happens when the market is a monopoly. Unfortunately, software, as it is now (i.e. almost completely uregulated), is super conducive to breeding monop

by badpun 4y ago

That only happens when the market is a monopoly. Unfortunately, software, as it is now (i.e. almost completely uregulated), is super conducive to breeding monopolies.

TeMPOraL 4y ago
I don't think it has anything to do with monopolies. Just look around you, in the physical world. It's increasingly hard to get quality anything - quality clothes, quality tools, quality foods. So many commodities - the opposite of monopoly - end up optimized to the point of being junk. I suppose in a perfect theoretical world - the one inhabited by frictionless spherical vacuums in a cow - this wouldn't be the case; market competition would allow people valuing quality to pay for it, and get quality things. The real world, unfortunately, is full of friction, and full of limits. An example phenomenon, that seems to commonly occur in all kinds of product categories, is the self-segregation of vendors into two groups: the cheap vendors, and the premium vendors. Every vendor serving the "middle" - selling high quality products for a reasonable price - has two obvious ways to improve their margins: move "down" a little bit, by cutting on quality to lower their costs and pocket the difference, or go "up" a little, by improving quality further and increasing the price even more, again pocketing the difference. Here's what happens when each vendors makes such step, either "up" or "down": - Some customers prefer to take the step "down", some others are happy to go "up", but this isn't symmetrical - at any point, a subset of customers is hitting its spending limits, in the sense of marginal price increase not being worth the marginal quality improvement. Those customers will migrate "down". - Customers preferentially migrating "down" means the slightly lower quality product gets cheaper (economies of scale), while the vendors of the slightly higher quality product need to raise prices even more, to compensate. - Profits of each of the vendors improve - both of those going "up" and "down" - but then, competitors follow and the extra margin evaporates. - As a result, companies end up being somewhat locked in their choice - trying to reverse it will only risk getting outcompeted. Now, iterate that several times, and you can see how the market starts splitting into two clusters. Unfortunately, because the market size (number of likely customers) is limited, trying to keep serving the "middle" only means you watch your customer base evaporate. Eventually, the profits available in the middle are not enough to recoup fixed costs, at which point the whole quality class itself evaporates. Without it, new customers have no choice - it's either the shitty version or the overpriced version, because the good deal is no longer on the market. Note that there are no monopolies in sight in this scenario - all it takes is to have a finite population and fixed costs, and over time, the market will segregate into a cluster of maximally shitty versions of a product, and a cluster of exclusive (or certified/supported industrial use versions) but expensive versions of it.

by badpun 4y ago

That only happens when the market is a monopoly. Unfortunately, software, as it is now (i.e. almost completely uregulated), is super conducive to breeding monopolies.

TeMPOraL 4y ago

I don't think it has anything to do with monopolies. Just look around you, in the physical world. It's increasingly hard to get quality anything - quality clothes, quality tools, quality foods. So many commodities - the opposite of monopoly - end up optimized to the point of being junk. I suppose in a perfect theoretical world - the one inhabited by frictionless spherical vacuums in a cow - this wouldn't be the case; market competition would allow people valuing quality to pay for it, and get quality things. The real world, unfortunately, is full of friction, and full of limits. An example phenomenon, that seems to commonly occur in all kinds of product categories, is the self-segregation of vendors into two groups: the cheap vendors, and the premium vendors. Every vendor serving the "middle" - selling high quality products for a reasonable price - has two obvious ways to improve their margins: move "down" a little bit, by cutting on quality to lower their costs and pocket the difference, or go "up" a little, by improving quality further and increasing the price even more, again pocketing the difference. Here's what happens when each vendors makes such step, either "up" or "down": - Some customers prefer to take the step "down", some others are happy to go "up", but this isn't symmetrical - at any point, a subset of customers is hitting its spending limits, in the sense of marginal price increase not being worth the marginal quality improvement. Those customers will migrate "down". - Customers preferentially migrating "down" means the slightly lower quality product gets cheaper (economies of scale), while the vendors of the slightly higher quality product need to raise prices even more, to compensate. - Profits of each of the vendors improve - both of those going "up" and "down" - but then, competitors follow and the extra margin evaporates. - As a result, companies end up being somewhat locked in their choice - trying to reverse it will only risk getting outcompeted. Now, iterate that several times, and you can see how the market starts splitting into two clusters. Unfortunately, because the market size (number of likely customers) is limited, trying to keep serving the "middle" only means you watch your customer base evaporate. Eventually, the profits available in the middle are not enough to recoup fixed costs, at which point the whole quality class itself evaporates. Without it, new customers have no choice - it's either the shitty version or the overpriced version, because the good deal is no longer on the market. Note that there are no monopolies in sight in this scenario - all it takes is to have a finite population and fixed costs, and over time, the market will segregate into a cluster of maximally shitty versions of a product, and a cluster of exclusive (or certified/supported industrial use versions) but expensive versions of it.