The idea is interesting but I don't think he proved his premise.
Big tech is built on predatory pricing
11–20 of 99 posts
Re: Big tech is built on predatory pricing
#12Great research and writing. The inevitable conclusion is that Amazon and uber are either doomed or are doing to jack up pricing some day.
...are either doomed or are doing to jack up pricing some day.
...Thus dooming themselves to be, if nothing else, undercut by their own previous strategies.
Re: Big tech is built on predatory pricing
#13Regarding Amazon, I seem to recall reading similar accusations leveled at Wal-Mart around the turn of the millennium. Their low prices were going to destroy local small retail businesses, then they'd reap monopoly profits after the competition died. It looks like the first thing happened but the second didn't. Prices might have rebounded a bit at a Wal-Mart after their initial arrival in a community, but they didn't…
Thing is, the profit margin is still there or even greater for Wal-Mart than 'Bobs Local Hardware Store'. Wal-Mart items are generally poor quality (cheaper) and they are notorious for bullying manufacturers and distributors for meeting a target price. They often win in these cases, which keeps their prices lower. But make no mistake, some of the cheaper items are not the same items you would get from even another bi…
Yes, I've read elsewhere that they're often not the same items. Whether this is good or bad for consumers is hard to say. Are the corners being cut things that their customers care about? If the customers are happy with what they get, the lower price is a win, and Walmart is right to encourage their suppliers to economize where they can.
Of course, there are also places where quality shouldn't be cut, and other side-effects of the drive to lower prices (lower pay for workers, etc). But this still seems like a subjective judgment call to be made on a case-by-case basis, not an obvious black-and-white issue.
Re: Big tech is built on predatory pricing
#14This analysis seems pretty shallow. It's interesting that Amazon is losing money in North America. But why? That's clue worth investigating further, not a reason to immediately assume predatory pricing.
Re: Big tech is built on predatory pricing
#15This reminds me of an old Russian joke.
3 business owners are in a communist jail. That ask each other what they are in for.
Person 1: "I set my prices lower than my competitors, and got sent to jail for price dumping!"
Person 2 "I set my prices higher than my competitors and got sent to jail for price gouging!"
Person 3 "I set my prices to be the same as my competitors and got set to jail for price fixing!"
It has been almost 20 years since Amazon got started. When are those mythical monopoly price increases coming?
I bet that in another 20 years people are going to be saying the same argument about price dumping or whatever.
Re: Big tech is built on predatory pricing
#16The article is clearly written by someone who has a vested interest in the incumbents who are now up against Uber and Amazon.
Uber burns cash like pretty much any funded startup but there's nothing in the article suggesting their unit economics are flawed. Is the author really suggesting that competition law should force companies like Uber to set their price higher than the competition?
It's called disruption for a reason.
Re: Big tech is built on predatory pricing
#17Earlier quoted context omitted.
You need enough drivers to get a ride on demand at any time/location and enough riders to keep them busy. Too few drivers you get long waits or surge prices. Too few riders and the drivers start to disappear...
That's called a two-sided-marketplace. It quickly saturates (i.e. you need some minimum number of drivers and riders to bootstrap the marketplace). Network effect is when each user brings additional users (or each user prevents other users from leaving).
It is not just about saturation.
For every additional driver, the density of drivers on a map gets higher. When this happens, statistically the closest driver will take X less time to get to you.
Two sided markets are not about having a minimum number of people.
Two sided markets are literally a network effect.
https://en.m.wikipedia.org/wiki/Two-sided_market
The "traditional" network effect is describing one sided markets. But it is a normal economic concept to talk about the two sided network effect as well.
Think of it this way. In a 1 sided network, ever user type A makes it more valuable for other user type As.
In a two sided market every User A makes the network more valueable for User type Bs. And every User type B makes it more valuable for user type As.
Re: Big tech is built on predatory pricing
#18What Uber is doing here should absolutely not be allowed. Whenever you go to a city where Uber is in it's first year of operations the prices are insanely low. This also happens when Uber launches a new product like Pool. This enables them to crowd out any competition and then raise prices once they've got control of the market. I have a friend in SF who takes Uber to work every day. It's about 3.5 miles. I assumed h…
What Uber is doing here should absolutely not be allowed.
Re: Big tech is built on predatory pricing
#19What Uber is doing here should absolutely not be allowed. Whenever you go to a city where Uber is in it's first year of operations the prices are insanely low. This also happens when Uber launches a new product like Pool. This enables them to crowd out any competition and then raise prices once they've got control of the market. I have a friend in SF who takes Uber to work every day. It's about 3.5 miles. I assumed h…
What Uber is doing here should absolutely not be allowed. What Uber is doing is called loss leading. It would be very hard to outlaw or regulate in any sort of "fair" way. The result you fear--a monopoly with price control--is illegal and is tightly regulated.
You might be able to classify it as dumping.
Loss leading itself could also be regulated more. For example, in France it's illegal to resell something for less than the price you paid for it (except during regulated "sales" periods). This prevents companies coming in and using their funds to subsidize the products.
I could see the argument that Uber is a reseller, given they're not part of the actual taxi experience
Re: Big tech is built on predatory pricing
#20The author seems to be confused on cause and effect. The newspaper example shows customers were better off 3+years with "The Times" pricing.
The whole thing needs to be understood by looking at how things actually started. Let's take the example of Uber. People weren't happy with the way taxi services were operating so it was ripe for "disruption". But, getting into a stranger's car for a ride was not really a solution.
So Uber had to create a two way market - entice people to offer their cars and entice people to take a stranger's car. They also had to offer up incentives on both sides of the market to ensure participation - offer drivers with perks and higher payouts while the riders got cheap pricing. Once the market was established and verified they had to find a way to make money. The only problem was riders or customers could not be inconvenienced, at least a lot. So, now the drivers had to bear the brunt.
But, this will lead to some unintended consequences. An example is that instead of trying to charge customers fairly Uber uses "surge pricing" - so much so that there are place which are mulling to ban this practice. Then there are cases of drivers trying to defraud riders too. This invariably causes lowered customer experience.