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Markets are competitive if and only if P != NP

arxiv.org

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Re: Markets are competitive if and only if P != NP

#111

Post by _alternator_ »

abetusk wrote: post #107

There's a long history of proving results like this. NP-Completeness is the norm, not the exception. Any system that's complex enough is almost surely NP-Complete. For similar reasons, Turing Machine Equivalence is also the norm, not the exception. These results are interesting but not unexpected. A more interesting question is under what conditions is the problem difficult to find solutions for. Many NP-Complete ins…

Right. Maybe a better and more humble title is "Identifying General Instances of Market Collusion is NP-complete". Not as headline grabbing, but more in line with the actual result.

Re: Markets are competitive if and only if P != NP

#112

Post by seizethecheese »

> markets can be informationally efficient or competitive, but not both

Really interesting conclusion, but I can't help but feel this is overly reductive, as stated. Surely market efficiency is a sliding scale and so is market competitiveness.

Okay, so a perfectly competitive market cannot also be a perfectly efficient market. Interesting! But I'm confused about how this may work when efficiency and competitiveness are a sliding scale. Should we think of this as one axis (with a spectrum from efficiency to competitiveness) or as two separate axes that just happen to have an exclusive relationship between their extremes?

Re: Markets are competitive if and only if P != NP

#113

Post by dreambuffer »

j05ev1f3 wrote: post #100

This feels like it's pointing in the same direction Hayek was already pointing 80 years ago. This paper says that even if we had enough computing power to solve these problems, Hayek's argument was that we still wouldnt have all the information needed to do those calculations in the first place. That information is spread across millions of people, constantly changing, and often only known locally. So even if the com…

But you can just give computers to each of those millions of people and propagate the information, instead of having less reliable humans doing it? That's kind of what's already happening.

Re: Markets are competitive if and only if P != NP

#114

Post by dash2 »

peder wrote: post #95
throwaway27448 wrote: post #89

Earlier quoted context omitted.

The fact that free markets don't exist, and that supply and demand is not a natural law that implies efficient markets has never stopped people acting like both are true and stuffing fingers in their ears. But, both free markets and supply/demand are useful enough concepts to talk loosely about processes to understand the interest that I'll enjoy digging into this.

They're not just useful concepts tho, they're how every business operates, and the concepts cover the vast majority of situations. The behavioral economics/Freakonomics thing was like "Hey, here's this thing that might if you squint real hard fall outside of efficient market theory" and then for a decade people took that to mean that that the base concepts were worthless , which was a severe overcorrection from peopl…

There are many ways that free and competitive markets can fail other than behavioural economics! Monopoly, informational asymmetry, externalities… All of these are plausibly pervasive.

Re: Markets are competitive if and only if P != NP

#115

Post by HPsquared »

falcor84 wrote: post #93
nok22kon wrote: post #38

Earlier quoted context omitted.

assuming the typical "spherical market in a vacuum where the agents are maximally rational non-biological utility maximizers"

Well, for better or worse, markets are becoming increasingly dominated by "non-biological utility maximizers" - mostly hft bots, but now also llm-based reasoning agents.

They're not necessarily maximising utility, just the number on the screen.

Re: Markets are competitive if and only if P != NP

#116

Post by wrqvrwvq »

peder wrote: post #95
throwaway27448 wrote: post #89

Earlier quoted context omitted.

The fact that free markets don't exist, and that supply and demand is not a natural law that implies efficient markets has never stopped people acting like both are true and stuffing fingers in their ears. But, both free markets and supply/demand are useful enough concepts to talk loosely about processes to understand the interest that I'll enjoy digging into this.

They're not just useful concepts tho, they're how every business operates, and the concepts cover the vast majority of situations. The behavioral economics/Freakonomics thing was like "Hey, here's this thing that might if you squint real hard fall outside of efficient market theory" and then for a decade people took that to mean that that the base concepts were worthless , which was a severe overcorrection from peopl…

Knowledge accumulation seems to have cyclical patterns where general observations are condensed into "laws", and common wisdom is to treat these as unassailable truths. As exceptions and contradictions are found, the popular wisdom is to entirely dismiss the overwhelming universal conformity with the earlier principles because it sounds smart to common people. A lot of normal people see the basic problems with most methodological maxims but are led to believe that the maxim is truth. It takes a podcaster with a "study" to then "debunk" the "myth" they were yesterday defending as unimpeachable. People are generally not well informed enough to know anything and the podcaster class is the worst imaginable vector for knowledge dissemination or popularization. Just clickbait garbage monkeys with foreign money and vicious antisocial tendencies.

Re: Markets are competitive if and only if P != NP

#117

Post by tsimionescu »

lokar wrote: post #37
derektank wrote: post #32

Earlier quoted context omitted.

Yeah, the most obvious recent example of this is RealPage’s YieldStar product. It advised property managers on what they should set their rental rates to, and allegedly established a cartel in which RealPage’s customers coordinated in pricing their units. YieldStar was technically an “AI” product, but I don’t really think the computational abilities were what enabled the collusion. RealPage’s employees (according to…

I’m not sure the use of a common algorithm was the most damming part of that. They also pooled otherwise proprietary information and penalized landlords who failed to follow the “recommendations” You could imagine the exact same scheme without the use of a computer.

I think the common algorithm / the computer were the fig leaf, not the enabler, yes. The point is that they tried to launder obvious cartel practices as a simple computer recommendation system.

Re: Markets are competitive if and only if P != NP

#118

Post by danans »

moomin wrote: post #18

I don’t think anyone in the business thinks that the markets are 100% efficient, just that they are sufficiently efficient that beating them is a genuinely hard job requiring heavy, expensive analysis.

> just that they are sufficiently efficient that beating them is a genuinely hard job requiring heavy, expensive analysis

No expensive analysis is needed. Beating them just requires (1) having disproportionate capital to others, and (2) having disproportionate control (and therefore know in advance) whatever the markets are pricing.

It helps that there are enough believers (in the religious/cult sense) that markets are 100% efficient, that they will deny that any of that is happening - even while they lose their shirts to those who are doing the market manipulation.

Re: Markets are competitive if and only if P != NP

#119

Post by wrqvrwvq »

tsimionescu wrote: post #110
peder wrote: post #95

Earlier quoted context omitted.

They're not just useful concepts tho, they're how every business operates, and the concepts cover the vast majority of situations. The behavioral economics/Freakonomics thing was like "Hey, here's this thing that might if you squint real hard fall outside of efficient market theory" and then for a decade people took that to mean that that the base concepts were worthless , which was a severe overcorrection from peopl…

The vast majority of real world businesses create prices based on cost plus systems, not on supply/demand, which are generally impossible to measure directly. Another good chunk of smaller businesses simply copy the prices of larger businesses, at least in b2c markets. Sure, if their goods are not selling, they might reduce price, but they might try other tactics as well (marketing, targeted discounts, etc).

these "other tactics" are just attempts at increasing demand. Cost plus is how many business set prices but that is entirely separate from what the market decides. If cost plus is not an attractive price, it won't sell, because the demand is not there.
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