11–20 of 73 posts
If that fails. Coase's argument fails. No?
I mean, with any theoretical modeling, you have to assume that the market actually fits the theory's requirements, right? From what I can gather just reading about it, the market the Coase conjecture model requires is one with a fixed set of consumers, a homogeneous durable good, and a monopolistic seller. But the real ebook market has a constant influx of new consumers, substitute content, complex contract structures, and, crucially, promotional events and coupons.
So in the end, I think we have to understand it as something that only holds under very specific conditions, not something that maps neatly onto real world cases.
That said, I'm curious. If you were to model the ebook market in general, what would the high impact variables be, and which ones would have relatively little influence?
But what I don't get is, are there even that many markets where the Coase conjecture actually holds? I'm not so sure.
I mean, you take reality and you turn it into a theoretical model. So my question is, are there really that many markets out there that fit the Coase conjecture in the first place? Sometimes when I read stuff about economics, it feels like people slice up the variable modeling to only look at what they want to see, and only in the regions they want to see, and then they claim it's universal. Of course, counterexamples keep popping up. And that's why it always feels so shaky.
I had to look up “MC” to be able to understand this. It means Marginal Cost. EDIT I still don’t understand it, I think. My read is: someone named Coase theorized that monopolists of durable goods will actually sell their products at marginal cost because of some weird mind game with their customers (the obvious unwritten corollary being that monopolies are fine ). This is obviously untrue and we all know plenty of ex…
It's one of those "imagine a frictionless, perfectly spherical pig in a vacuum" theories that don't survive contact with reality. Buyers don't just pop up on timestamp zero and remain unchanged. They anticipate price changes, potential new buyers come in, the market is dynamic. I also don't understand why this only affects monopolies. The same logic should dictate that all products and services fall towards MC?
The authors themselves had the same reaction.
It's similar to physics: you make small simple models, you investigate what they say, you compare to what you get in reality, and then you make adjustments.
The interesting bit is: what kinds of friction or airpressure or shape do you need to add to your pig to recover what parts of reality?
In practice a lot of reader will just be looking for a hit for their dark academia vampire romantasy addiction. The book is essentially read once, and the buyer is perfectly fine with a different title. It's durable in the same way that a newspaper is, and the publisher has a monopoly in the same way that a used car salesman has a monopoly on the car with VIN f6d45280.
Similarly, the reader's perceived value isn't constant. A newly-released "part 1 of 7" of an unknown author (who knows if it'll ever even get a part 2) is less interesting than the debut novel of a well-established author. Likewise, demand can significantly increase due to the release of a spinoff TV series, or significantly decrease when the author is disgraced in some scandal.
There's only a true monopoly on things like college books, and there the demand has basically zero elasticity: either accept paying $200 for the book now, or fail your $2000 course. And those aren't exactly durable either!
Earlier quoted context omitted.
It's one of those "imagine a frictionless, perfectly spherical pig in a vacuum" theories that don't survive contact with reality. Buyers don't just pop up on timestamp zero and remain unchanged. They anticipate price changes, potential new buyers come in, the market is dynamic. I also don't understand why this only affects monopolies. The same logic should dictate that all products and services fall towards MC?
> The theorists, most notably Gul, Sonnenschein and Wilson and Fudenberg, Levine and Tirole, formalized Coase’s insight and showed that under quite general conditions the logic goes through. Which is rather surprising, since, as Tim and I point out, Coase’s conjecture implies that many patents and copyrights are essentially worthless — a prediction wildly at variance with the facts. The authors themselves had the sam…
> quite general conditions [under which] the logic goes through.
This seems pretty contradictory. There is no hint at which of the constraints is edited to fit better to reality.
I had to look up “MC” to be able to understand this. It means Marginal Cost. EDIT I still don’t understand it, I think. My read is: someone named Coase theorized that monopolists of durable goods will actually sell their products at marginal cost because of some weird mind game with their customers (the obvious unwritten corollary being that monopolies are fine ). This is obviously untrue and we all know plenty of ex…
The conjecture assumes durable goods, so it doesn't apply to medicine. Also no resale, so that narrows the scope even more. The gist of the conjecture is that if the customers can wait out for price drops and the monopolist wants to sell their thing, then after a few rounds of "he knows that we know that..." the price ends up to be the marginal cost. Now, real world disagrees with the model, so next steps are to exam…
The conjecture requires a theory of time in the form of periods/rounds to reduce price to zero - but wants to ignore time when it comes to information spread and product value.
Pinning a variable to any 1 extreme can be very informative, but when the variable has to both exists to justify the presumption, but also be ignored in the model - you're not going to find an elegant basis for a grand-theory-structure to add corrective terms onto.
Instead, you'll just get a mess of variables from over-fitted data.
I had to look up “MC” to be able to understand this. It means Marginal Cost. EDIT I still don’t understand it, I think. My read is: someone named Coase theorized that monopolists of durable goods will actually sell their products at marginal cost because of some weird mind game with their customers (the obvious unwritten corollary being that monopolies are fine ). This is obviously untrue and we all know plenty of ex…
As far as I can tell that is indeed, "it". What is maybe more interesting is that it took this long to find data that shows it wrong given we have so many examples in history of it being in fact wrong.
I had to look up “MC” to be able to understand this. It means Marginal Cost. EDIT I still don’t understand it, I think. My read is: someone named Coase theorized that monopolists of durable goods will actually sell their products at marginal cost because of some weird mind game with their customers (the obvious unwritten corollary being that monopolies are fine ). This is obviously untrue and we all know plenty of ex…
It's one of those "imagine a frictionless, perfectly spherical pig in a vacuum" theories that don't survive contact with reality. Buyers don't just pop up on timestamp zero and remain unchanged. They anticipate price changes, potential new buyers come in, the market is dynamic. I also don't understand why this only affects monopolies. The same logic should dictate that all products and services fall towards MC?