Big Brother and now private companies

> IF costs come down it has nothing to do with
> competition created by use of electronic
> tags. It comes down because of supply and
> demand .

I disagree with this point. I know you all know I disagree with it, but I thought I'd try to illustrate why I think competition has a big impact on pricing.

Let's suppose I'm in the business of selling CD players. And so are 14,000 other people. There is heavy competition. The product I sell does not differ from any one of my competitors.

I buy the product for $1,000, and try to sell it for $2,000. Let's just assume there's no other cost other than the $1,000. A competitor selling the same product might see that, and lower his prices to $1,900. Who would buy from me when they can buy the same product from someone else for $1,900?

Chances are some people will -- those who don't know or can't be bothered -- but chances are the demand for my product will decline due to the price decline.

Unless all competitors collude to keep prices up, which is unlikely in a competitive environment, prices should decline to a point where a more 'normal' return on capital is enjoyed.

Now let's suppose instead of the above situation, I sell CD players, but this time I'm the only one in the world that does, and nobody else can. I'm a monopoly retailer, in other words.

How am I going to set my pricing? Well, chances are I'll set them above the normal market clearing rate because, hey, as a consumer you've got no choice and have to accept it.

It's one of the reasons selling MS Windows has a higher profit margin than selling fruit and vegetables -- Windows enjoys monopoly pricing whereas a fruit and vegetables retailer has stiff competition.

Thus, I think competition does affect prices, and it's not some magical thing that has no effect.

> This arguement also assumes people buy based
> on price and price alone.

> Not the case. Can't recall who said it, at
> this point in time, but it goes something
> along the lines of, "people WANT to pay
> more, if only you will give them a reason
> to." My experience proves this
> statement is true. (Rolex, Mercs, Rangies,
> etc.)

While your experience may suggest that statement is true, I'd be surprised if it's true in all cases. I would say in most cases people prefer to pay less for the same thing than more. Anyone who has been around compulsive discount shoppers will be aware of this.

Sure, there are examples where price may increase demand -- luxury goods specifically, or goods where the value might not be apparent or obvious to the buyer -- but I'd say for most goods this isn't the case.

> Look at the stockmarket... supply and
> demand.

Prices in the stockmarket are set primarily by competition amongst stock analysts and fund managers trying to buy good companies. It's very difficult to beat the market because it is efficient. It's efficient because of that competition.

> Price of CD Players when they first came
> out. Supply and demand brought the prices
> down... not some mythical competition
> between Walmart and KMart.

Another way to look at it is to say that competition increases supply which pushes down prices. If there was no competition, and a monopoly retailer you could artificially constrain supply, or in other words increase prices.

> Lets also remember... your examples are
> based on some people having tags and some
> not having tags.

> Whereas in reality... everything will have
> tags because of The Network Effect . The
> same effect which forces almost all
> companies to upgrade their OS and applicable
> software - Word, Excel, etc. Because if they
> don't, then new price lists and manifests
> created on the new software can't be read.

The reason I keep mention cost reductions is because I think it's integral to the reality of the situation.

Let's suppose that there are *no* cost saving measures and no efficiency gains from new technologies, since obviously assuming these is just fantasy. In that scenario, why would it matter if price lists can't be read and so forth? If there's no efficiency gains then you can just get someone to manually read it without additional cost, right?

I mean, if you assume that there are no efficiency gains or cost savings then you might as well assume you can operate a retailer or other business without use of these tags and you'd get business from people like yourself with no impact on cost.

If you assume there are efficiency gains -- and this is a likely outcome given that companies are profit-maximising organisations -- then these gains should be competed away.

You mentioned that prices don't instantly fall. This is probably true. But over time prices are probably lower than they otherwise would have been. Try to set up a grocery store that computes bills manually, without a calculator, when customers walk out. If you did this, you'd be ignoring new technology and your costs would increase, and to compensate you'd either need to increase your prices or run at a loss. Having said that, I think it's fair to say that the technology at the counter does, over time, reduce the end cost to the consumer.

> As for the clerk finding out info if they
> are a peadophile... the difference between
> what Cornell mentioned and your example is
> one of choice...

> In your case... you have willingly given
> those details - for whatever reason. In
> Cornell's example... walking into the store
> saw your details taken WITHOUT YOUR
> PERMISSION.

In my example I wouldn't give permission to someone that happens to be working in that bank or school either. I don't see a big difference.

> There is a big to-do about software which
> tracks your online movements without
> permission. But you don't seem too concerned
> about this. And this is far worse!

I agree -- it is far worse. :)

I'll say it again -- my main point is that giving up privacy rights is not a one sided issue.

It's easy to say "I support privacy" when it's a costless proposition. If there's no net benefit from invading someone's privacy rights, I'll support it every time. Who wouldn't?

I'm not trying to say people should support these chips. All I'm saying is that there might be some benefit to them that instantly dismissing them will overlook.

Also, I'm not really sure why my talk of potential cost cutting is dismissed as fantasy whereas mythical scanners that look at your boot or bin and instantly tell you what's there is closer to reality. :)

- Thomas.

> I disagree with this point. I know you all
> know I disagree with it, but I thought I'd
> try to illustrate why I think competition
> has a big impact on pricing.

> Let's suppose I'm in the business of selling
> CD players. And so are 14,000 other people.
> There is heavy competition. The product I
> sell does not differ from any one of my
> competitors.

You are thus selling a commodity. Commodities only selling point is price. Because... much supply (supply and demand again).

> While your experience may suggest that
> statement is true, I'd be surprised if it's
> true in all cases. I would say in most cases
> people prefer to pay less for the same thing
> than more. Anyone who has been around
> compulsive discount shoppers will be aware
> of this.

And likewise... anyone who has been around "label" shoppers will also tell you otherwise - as these people LOVE spending money on designer label stuff and the more pricey the better.

Fun this picking singling out, isn't it?

> Sure, there are examples where price may
> increase demand -- luxury goods
> specifically, or goods where the value might
> not be apparent or obvious to the buyer --
> but I'd say for most goods this isn't the
> case.

> Prices in the stockmarket are set primarily
> by competition amongst stock analysts and
> fund managers trying to buy good companies.
> It's very difficult to beat the market
> because it is efficient. It's efficient
> because of that competition.

What you are calling competition to buy is DEMAND.

> Another way to look at it is to say that
> competition increases supply which pushes
> down prices. If there was no competition,
> and a monopoly retailer you could
> artificially constrain supply, or in other
> words increase prices.

So there. You have argued yourself back to the point of supply and demand.

> The reason I keep mention cost reductions is
> because I think it's integral to the reality
> of the situation.

No-one is disagreeing with cost reductions. The disagreement is in the passing on of those reductions.

> You mentioned that prices don't instantly
> fall. This is probably true. But over time
> prices are probably lower than they
> otherwise would have been.

Okay. Quick survey.... everyone who has a family to support... please raise your hand IF you have found that prices have been coming down?

Sorry... if you think prices are PROBABLY lower than they otherwise would have been due to technology changes which have enabled the selling business to reduce cost.

> Having said that, I think it's fair to say
> that the technology at the counter does,
> over time, reduce the end cost to the
> consumer.

Again. Please raise your hand if you have seen prices come down over time.

> In my example I wouldn't give permission to
> someone that happens to be working in that
> bank or school either. I don't see a big
> difference.

The difference is... when you give your details to a bank you do so willingly. When your details are taken from a chip or whatnot, it is done without your permission. See the difference now? One is WITH your permission and the other is WITHOUT your permission.

> I'm not trying to say people should support
> these chips. All I'm saying is that there
> might be some benefit to them that instantly
> dismissing them will overlook.

The benefits you have mentioned can all be had without ID Tags.

> Also, I'm not really sure why my talk of
> potential cost cutting is dismissed as
> fantasy whereas mythical scanners that look
> at your boot or bin and instantly tell you
> what's there is closer to reality. :)

Again, no-one is disagreeing that these tags will not cut costs. The disagreement is that items will be cheaper for the consumer.

Let me give you just one example of tremendous use of technology to improve efficiency and cut costs and how it has resulted for the consumer...

BANKS!

Every year there are more and more technologies put in place to remove person to person interaction and speed everything up. Every year bank fees go up and banks make NEW RECORD PROFITS - and then complain they need to raise rates again to stay profitable.

My bank recently raised their merchant participation fee from $8 per month to $22 per month. Why? And I quote what was told to me... "To bring the prices more in line with what other banks charge."

As for the chip reader you claim is fantasy... the chips are designed to be read. That is their purpose. Thus a reader able to read these chips is not fanatasy.

Michael Ross