https://pluralistic.net/2024/03/01/managerial-discretion/#junk-fees
'For the pro-monopoly crowd that absolutely dominated antitrust law from the
Carter administration until 2020, Amazon presents a genuinely puzzling paradox:
the company's monopoly power was
never supposed to emerge, and if it did, it
should have crumbled immediately.
Pro-monopoly economists embody Ely Devons's famous aphorism that "If economists
wished to study the horse, they wouldn’t go and look at horses. They’d sit in
their studies and say to themselves, ‘What would I do if I were a horse?’":
https://pluralistic.net/2022/10/27/economism/#what-would-i-do-if-i-were-a-horse
Rather than using the way the world actually works as their starting point for
how to think about it, they build elaborate models out of abstract principles
like "rational actors." The resulting mathematical models are so abstractly
elegant that it's easy to forget that they're just imaginative exercises,
disconnected from reality:
https://pluralistic.net/2023/04/03/all-models-are-wrong/#some-are-useful
These models predicted that it would be impossible for Amazon to attain
monopoly power. Even if they became a monopoly – in the sense of dominating
sales of various kinds of goods – the company still wouldn't get monopoly
power.
For example, if Amazon tried to take over a category by selling goods below
cost ("predatory pricing"), then rivals could just wait until the company got
tired of losing money and put prices back up, and then those rivals could go
back to competing. And if Amazon tried to keep the loss-leader going
indefinitely by "cross-subsidizing" the losses with high-margin profits from
some other part of its business, rivals could sell those high margin goods at a
lower margin, which would lure away Amazon customers and cut the supply lines
for the price war it was fighting with its discounted products.
That's what the model predicted, but it's not what happened in the real world.
In the real world, Amazon was able use its access to the capital markets to
embark on scorched-earth predatory pricing campaigns. When diapers.com refused
to sell out to Amazon, the company casually committed $100m to selling diapers
below cost. Diapers.com went bust, Amazon bought it for pennies on the dollar
and shut it down:
https://www.theverge.com/2019/5/13/18563379/amazon-predatory-pricing-antitrust-law
Investors got the message: don't compete with Amazon. They can remain predatory
longer than you can remain solvent.'
Cheers,
*** Xanni ***
--
mailto:xanni@xanadu.net Andrew Pam
http://xanadu.com.au/ Chief Scientist, Xanadu
https://glasswings.com.au/ Partner, Glass Wings
https://sericyb.com.au/ Manager, Serious Cybernetics
