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In general I do not understand how auctioning for a thing with fixed cost aligns with the principles of free market. Google owns the infrastructure of search,

In general I do not understand how auctioning for a thing with fixed cost aligns with the principles of free market. Google owns the infrastructure of search, maintaining them and showing ads has a finite cost. How does piting ad buyers in an auction is different than price gauging? Imagine apple every year introducing the new iPhone without a price and when you go to the cart it asks for your credit limits before it creates a unique price that magically matches exactly your credit limits.

Wowfunhappy 2y ago
> In general I do not understand how auctioning for a thing with fixed cost aligns with the principles of free market. Isn't it kind of like real estate? In theory, it should cost roughly the same amount to build a house in the middle of nowhere versus the center of Manhattan. But more people want to live in Manhattan, and there's a limited amount of space, so buyers effectively bid up the price. On any given website, there is a limited amount of ad space.
soared 2y ago
An ad for a specific user is worth a different amount to each advertiser for a couple reasons. You don’t sell something based on what it costs, you sell it based on what it worth. Search is a bit different than display which is covered in the article, but imagine 2 jewelry companies that are exactly the same. A user searching for “necklaces” you’d think each company would bid the same amount to advertise there. But say one company is trying to raise a round of funding and needs to drive sales, they’ll bid higher to increase sales but at a lower roas. The other company is satisfied with their revenue and doesn’t bid higher. In display each bidder has different information about a user (they may have their own data about a users behavior on their website, or it may be provided by a vendor that other bidders aren’t using). So the difference in price is largely a difference in information.
azurezyq 2y ago
"a thing with fixed cost", just imagine the billboard in downtown. The cost is finite. But you'll know that the price would be aligned with ups and downs of the demand. You may use auction model, or you can continuously tune the price. Actually they may converge similarly, to the principles of free market. Same thing with real estates, or stocks. However the iPhone example you mentioned follows a different scheme. iPhone is not something people competing for, as long as stock lasts.
627467 2y ago
Why is it wrong for apple to charge differently.fpr different people? This already happens I'm different geographic regions. Apple devices are not essential goods. Why not charge people who get more value out of a product more?
mystified5016 2y ago
> In general I do not understand how auctioning for a thing with fixed cost aligns with the principles of free market. Simple: the 'free market' exists to maximize the price for a given good or service with respect to the demand for such. That's really the whole story here. > Imagine apple every year introducing the new iPhone without a price and when you go to the cart it asks for your credit limits before it creates a unique price that magically matches exactly your credit limits. This is how sevreral 'free' markets work already. Anything involving credit or finance, real estate. It is a grave mistake to assume that the actions of a free market have anything whatsoever to do with what is morally right, or even what is legal. The market makes line go up and that is the only thing it cares about. Capitalism does not give one good goddamn about who or what it may hurt, it can only ever consider the bottom line.
makeitdouble 2y ago
Reading between the lines, what you're pointing out beyond the ideas of "free market" and "price gauging" (I don't see any difference between the two TBH) is exactly that Google has monopolistic power in the space. They can set arbitrary prices and have customers pay anyway, with little fear of competition or market loss.
deleted 2y ago
[deleted]

Wowfunhappy 2y ago

> In general I do not understand how auctioning for a thing with fixed cost aligns with the principles of free market. Isn't it kind of like real estate? In theory, it should cost roughly the same amount to build a house in the middle of nowhere versus the center of Manhattan. But more people want to live in Manhattan, and there's a limited amount of space, so buyers effectively bid up the price. On any given website, there is a limited amount of ad space.

soared 2y ago

An ad for a specific user is worth a different amount to each advertiser for a couple reasons. You don’t sell something based on what it costs, you sell it based on what it worth. Search is a bit different than display which is covered in the article, but imagine 2 jewelry companies that are exactly the same. A user searching for “necklaces” you’d think each company would bid the same amount to advertise there. But say one company is trying to raise a round of funding and needs to drive sales, they’ll bid higher to increase sales but at a lower roas. The other company is satisfied with their revenue and doesn’t bid higher. In display each bidder has different information about a user (they may have their own data about a users behavior on their website, or it may be provided by a vendor that other bidders aren’t using). So the difference in price is largely a difference in information.

azurezyq 2y ago

"a thing with fixed cost", just imagine the billboard in downtown. The cost is finite. But you'll know that the price would be aligned with ups and downs of the demand. You may use auction model, or you can continuously tune the price. Actually they may converge similarly, to the principles of free market. Same thing with real estates, or stocks. However the iPhone example you mentioned follows a different scheme. iPhone is not something people competing for, as long as stock lasts.

627467 2y ago

Why is it wrong for apple to charge differently.fpr different people? This already happens I'm different geographic regions. Apple devices are not essential goods. Why not charge people who get more value out of a product more?

mystified5016 2y ago

> In general I do not understand how auctioning for a thing with fixed cost aligns with the principles of free market. Simple: the 'free market' exists to maximize the price for a given good or service with respect to the demand for such. That's really the whole story here. > Imagine apple every year introducing the new iPhone without a price and when you go to the cart it asks for your credit limits before it creates a unique price that magically matches exactly your credit limits. This is how sevreral 'free' markets work already. Anything involving credit or finance, real estate. It is a grave mistake to assume that the actions of a free market have anything whatsoever to do with what is morally right, or even what is legal. The market makes line go up and that is the only thing it cares about. Capitalism does not give one good goddamn about who or what it may hurt, it can only ever consider the bottom line.

makeitdouble 2y ago

Reading between the lines, what you're pointing out beyond the ideas of "free market" and "price gauging" (I don't see any difference between the two TBH) is exactly that Google has monopolistic power in the space. They can set arbitrary prices and have customers pay anyway, with little fear of competition or market loss.

deleted 2y ago

[deleted]