4 ms·

Because markets are neither rational nor perfectly elastic.

by falsemyrmidon 2mo ago

bryanlarsen 2mo ago
Which was also true before COVID. So what has changed?
- Ekaros 2mo ago
  Shock moved the price equilibrium to new higher price point. And big enough share of demand accepted that new price point.
  - hn_throwaway_99 2mo ago
    > And big enough share of demand accepted that new price point. Exactly - this is literally econ 101, no appeals to "greed" needed. As they say, the cure for high prices is high prices. You already saw this in a number of different areas. Fast food prices outpaced what people were willing to pay, so people stopped eating out and businesses needed to adjust accordingly.
    - math_loser 2mo ago
      > As they say, the cure for high prices is high prices. Your line of reasoning is downplaying the fact that we don't exist in a world with perfect markets or rational consumption habits. There are multiple clear cut examples of producer collusion and oligopoly formation in the past few years - including in the food industries (see eggs and pork in the past 5 years). Food being essential for life means consumers can't interact with the market rationally, just like they can't for insulin, transportation that enables income, and so on.
hn_throwaway_99 2mo ago
Fine, but blaming price increases on "greed" is still just as idiotic. Yes, market participants are "greedy" - sellers want to make the most money and buyers want to spend the least.
- BobbyTables2 2mo ago
  If only McDonalds charges $20 for a burger instead of $10, people will go elsewhere. If everyone charges $20 for a burger, people will still go to McDonalds. In such a state, no individual place would dare charge $10 again. Why cut revenue to nearly half? It’s not like they have the capacity to sell 20x the usual volume… I’m not convinced that basic economics works when output capacity isn’t fully scalable. Same reason no lawn care team tries to deeply undercut competitors - they can only mow so many! (Barring that they hire more helpers)
  - Rury 2mo ago
    That’s an uncompetitive market. No one can outcompete on service, so they can only compete on price, but why would you in such a circumstance, it would only hurt you, so nobody does. This is what people seem to forget... you don’t need monopolies or collusion for markets to be uncompetitive. Collusion works fundamentally because participants aren't competing with each other... not for the fact people made a secret agreement. It is entirely possible for markets to be completely uncompetitive even without a monopoly or any collusion going on. Your examples here are better known amongst economists as the Bertrand–Edgeworth model (https://en.wikipedia.org/wiki/Bertrand%E2%80%93Edgeworth_model https://en.wikipedia.org/wiki/Bertrand%E2%80%93Edgeworth_mod...)
  - rstuart4133 2mo ago
    > Why cut revenue to nearly half? Because, to quote Jeff Bezos, your margin is my opportunity. And did he ever squeeze every drop from that opportunity. Just ask the brick and mortar stores in your street. > I’m not convinced that basic economics works when output capacity isn’t fully scalable. Economics works for land, which isn't scalable. > Same reason no lawn care team tries to deeply undercut competitors That works right up until Fred down the road loses his job, and then it dawns he could be making more money with his mower because of those sweet fat margins those other lawn care people thought they could keep all to themselves.
    - lenkite 2mo ago
      > Because, to quote Jeff Bezos, your margin is my opportunity. And did he ever squeeze every drop from that opportunity. Just ask the brick and mortar stores in your street. Sure and now after having become the Shoggoth monopoly, Amazon is now increasing fees. Squeeze your competitors out via unlimited money and then begin to squeeze your customers after you become of the lone poles in the forest.

Because markets are neither rational nor perfectly elastic.

bryanlarsen 2mo ago

Which was also true before COVID. So what has changed?

Ekaros 2mo ago
Shock moved the price equilibrium to new higher price point. And big enough share of demand accepted that new price point.
- hn_throwaway_99 2mo ago
  > And big enough share of demand accepted that new price point. Exactly - this is literally econ 101, no appeals to "greed" needed. As they say, the cure for high prices is high prices. You already saw this in a number of different areas. Fast food prices outpaced what people were willing to pay, so people stopped eating out and businesses needed to adjust accordingly.
  - math_loser 2mo ago
    > As they say, the cure for high prices is high prices. Your line of reasoning is downplaying the fact that we don't exist in a world with perfect markets or rational consumption habits. There are multiple clear cut examples of producer collusion and oligopoly formation in the past few years - including in the food industries (see eggs and pork in the past 5 years). Food being essential for life means consumers can't interact with the market rationally, just like they can't for insulin, transportation that enables income, and so on.

hn_throwaway_99 2mo ago

Fine, but blaming price increases on "greed" is still just as idiotic. Yes, market participants are "greedy" - sellers want to make the most money and buyers want to spend the least.

BobbyTables2 2mo ago
If only McDonalds charges $20 for a burger instead of $10, people will go elsewhere. If everyone charges $20 for a burger, people will still go to McDonalds. In such a state, no individual place would dare charge $10 again. Why cut revenue to nearly half? It’s not like they have the capacity to sell 20x the usual volume… I’m not convinced that basic economics works when output capacity isn’t fully scalable. Same reason no lawn care team tries to deeply undercut competitors - they can only mow so many! (Barring that they hire more helpers)
- Rury 2mo ago
  That’s an uncompetitive market. No one can outcompete on service, so they can only compete on price, but why would you in such a circumstance, it would only hurt you, so nobody does. This is what people seem to forget... you don’t need monopolies or collusion for markets to be uncompetitive. Collusion works fundamentally because participants aren't competing with each other... not for the fact people made a secret agreement. It is entirely possible for markets to be completely uncompetitive even without a monopoly or any collusion going on. Your examples here are better known amongst economists as the Bertrand–Edgeworth model (https://en.wikipedia.org/wiki/Bertrand%E2%80%93Edgeworth_model https://en.wikipedia.org/wiki/Bertrand%E2%80%93Edgeworth_mod...)
- rstuart4133 2mo ago
  > Why cut revenue to nearly half? Because, to quote Jeff Bezos, your margin is my opportunity. And did he ever squeeze every drop from that opportunity. Just ask the brick and mortar stores in your street. > I’m not convinced that basic economics works when output capacity isn’t fully scalable. Economics works for land, which isn't scalable. > Same reason no lawn care team tries to deeply undercut competitors That works right up until Fred down the road loses his job, and then it dawns he could be making more money with his mower because of those sweet fat margins those other lawn care people thought they could keep all to themselves.
  - lenkite 2mo ago
    > Because, to quote Jeff Bezos, your margin is my opportunity. And did he ever squeeze every drop from that opportunity. Just ask the brick and mortar stores in your street. Sure and now after having become the Shoggoth monopoly, Amazon is now increasing fees. Squeeze your competitors out via unlimited money and then begin to squeeze your customers after you become of the lone poles in the forest.