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>Game theory supplies that just fine To a vastly lesser extent than when it's one company with one board and one CEO in charge of multiple business units that

>Game theory supplies that just fine To a vastly lesser extent than when it's one company with one board and one CEO in charge of multiple business units that would be unrelated after the breakup. If you break off Costco's chicken selling business from the rest of the store, the chicken business isn't going to keep their prices so low to boost the other company's sales because it costs them too much money to do so and they get far less benefit from boosting the other company's sales than when they were the same company.

NoMoreNicksLeft 3y ago
> If you break off Costco's chicken selling business from the rest of the store, It sure seems like that, but in the real world we do have many counter-examples where a singular company does do the loss leader thing for a long while, going into the red year after year. Often, it's never clear why or how they could think this was a winning business model. The chicken-selling business might do the same, and their justifications for doing that might never be sound, they might not even be the reasons why they're doing it, but just some post hoc rationalization to themselves and the real reason is poorly understood by all involved. If the rest of Costco sees this happening, are they going to step in and sabotage the chicken-sellers? Lord knows it drives some traffic to their stores (they might be unwilling to study that and write reports, as it could then be used against them if the FTC comes after them again, but they'd still notice). If they can subtly act to somehow ease the pressure, or make that worthwhile to the chicken-sellers without leaving a paper trail, they'd be fools not to do it right? Of course, without exotic economic principles, that can't last forever. But unless you're claiming that there are business units for AWS are deep into loss-leading, your analogy only applies very generally and it's difficult to see how they could fall into similar snags.

NoMoreNicksLeft 3y ago

> If you break off Costco's chicken selling business from the rest of the store, It sure seems like that, but in the real world we do have many counter-examples where a singular company does do the loss leader thing for a long while, going into the red year after year. Often, it's never clear why or how they could think this was a winning business model. The chicken-selling business might do the same, and their justifications for doing that might never be sound, they might not even be the reasons why they're doing it, but just some post hoc rationalization to themselves and the real reason is poorly understood by all involved. If the rest of Costco sees this happening, are they going to step in and sabotage the chicken-sellers? Lord knows it drives some traffic to their stores (they might be unwilling to study that and write reports, as it could then be used against them if the FTC comes after them again, but they'd still notice). If they can subtly act to somehow ease the pressure, or make that worthwhile to the chicken-sellers without leaving a paper trail, they'd be fools not to do it right? Of course, without exotic economic principles, that can't last forever. But unless you're claiming that there are business units for AWS are deep into loss-leading, your analogy only applies very generally and it's difficult to see how they could fall into similar snags.