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Thomas
@aviationdoctor.eth
An overrated aspect of free market competition, especially in triumphant capitalist economies where it is extoled as a self-evident dogma, is how Molochian (or zero-sum game-theoretical) it is. Take Johnson & Johnson and Procter & Gamble as examples of two very large corporations competing with each other. At some point, J&J launches a promotional campaign (ads, coupons, discounts, etc.) which increases its market share of a particular product by 0.5% for a month at the detriment of P&G's. The following month, it's P&G's turn to launch a promotional campaign that increases their own market share by 0.5% for a month at the detriment of J&J's. They both finish the year exactly as they started, only their entire marketing teams have now spent that year engaged in this pointless tug of war. 1/3
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Mike | Abundance š
@abundance
But if J&J and P&G decide to stop their zero-sum promotional campaigns, the alternative would be price coordination (which hurts consumers), no? Markets are inherently adversarial, so there is no point within the market decision-space that optimally benefits everyone. For that you need to build better systems
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Thomas
@aviationdoctor.eth
I donāt see why ā price fixing requires active coordination between the entities. If their marketing teams went on strike and stopped bothering with the promotional tug of war, thatās not the same as saying theyād phone each other and agree to align prices going forward, cartel style. Economies of scale, learning curve, etc in manufacturing and logistics still get to dictate the competitiveness of each companyās price. Thats independent from temporary marketing promotions. āMarkets are inherently adversarialā ā markets might still be competitive and possibly not wasteful in spending so much effort neutralizing each other for only marginal gains. Coopetition is a thing ā thatās what Iām looking to understand more creatively than the usual fixed mindset of āit is what it isā that prevails. Iāve also noticed that WC is largely ignorant of alt models (such as non-profits) because itās not within the realm of experiences of the 30-something VC-backed founder
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Mike | Abundance š
@abundance
Promotions in my mind is not much diff from subsidizing demand (by lowering prices). It's a function of markets with few competitors (otherwise you wouldn't have the budget for promotions etc). So if you don't subsidize demand in some way you're effectively colluding to keep prices higher (even if not explicitly). My point tho is that players in adversarial games don't have societally-optimal strategies. Any strategy would have winners and losers; if both companies do promotions it's a wasteful race to the bottom, if they collude, consumers pay more. If one dominates the market, that hurts the employees/investors of the other company, etc. This doesn't at all mean that "it is what it is" and we should give up. On the contrary, we need to design better systems - systems that are scalable & sustainable - but that has to start with understanding the limits of our current system.
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