Keeping secrets

Posted Apr 12, 2016 6:47 UTC (Tue) by donbarry (guest, #10485)
In reply to: Keeping secrets by pabs
Parent article: Moglen: How Should the Free Software Movement View the Linux Foundation?

We know that price-fixing is de jure illegal. But let's not entertain any illusions that it doesn't go on de facto. The loopholes that exist are legion: Airlines (in those few areas where there is still competition) inch fares up and down in something akin to the semaphores in contract bridge. The informal agreements against poaching agreed upon by Apple, Google, etc, and penalized with pretty minor wrist-slaps were only noticed because of the arrogance of Jobs, who couldn't resist bragging. And, of course, in a monopoly there's not even a reason to price-fix.

This is nothing new. Adam Smith, in _The Wealth of Nations_, Book I, Chapter X, Part II:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary. "

Keeping secrets

Posted Apr 12, 2016 8:54 UTC (Tue) by Wol (subscriber, #4433) [Link] (1 responses)

> Airlines (in those few areas where there is still competition) inch fares up and down in something akin to the semaphores in contract bridge.

GAME THEORY.

In areas with poor competition (we have this in the energy supply market in the UK) you do not need *any* communication between the players to result in what looks like price fixing.

When the price of your raw goods goes up, everybody raises prices. It's a game of dare - when the first one does it (hanging on as late as possible) everyone else follows suit.

When the price of your raw goods goes down, nobody drops their prices. Again it's a game of dare - once the first one drops, everyone else follows suit - BUT NOBODY WANTS TO DAMAGE THEIR NICE PROFIT MARGIN FOR WHAT THEY KNOW WILL BE MINIMAL GAIN.

Humans like to see patterns where there aren't any. And price fixing is often one of those illusions. I'm not saying it doesn't happen, but I am saying it's a lot less common than most people think - the *illusion* is an *inevitable* consequence of poor competition. And given the American penchant for "winner takes all" style business ...

Cheers,
Wol

price fixing and mens rea

Posted Apr 22, 2016 23:50 UTC (Fri) by Garak (guest, #99377) [Link]

I like the nuance you are highlighting, but it seems like you are splitting hairs with your definition of 'price fixing'. You articulated well how no actual communicative collusion is often required for the players to gain the benefit of elevated prices across the board. But your emphasis on labeling the effect as an illusion of price fixing, rather than price fixing is curious. The natural upstream philosophical question is- are there laws against either part of this split hair, and if the laws only apply to one half of the hair, is that for a good reason or a bad reason historically that might be better resolved with a little bit of modern brainstorming.