Given this overwhelming cost to jumping services, there is no realistic competition. Given so few sellers, buyers have little incentive to jump services, creating a feedback loop. As a result the sellers generally don't leave. If a seller jumps to another service, they look 90% or more of their potential buyers, dramatically reducing effective demand for their product and lowering their own profits. Thanks to the network effect, eBay is enjoying a very natural monopoly. When the market is distorted in such a way, one can no longer reasonably hold that the prices are necessarily reasonable and should be accepted without question.ĮBay might be such an example. The free market isn't ideal: Consumers aren't entirely rational, information is frequently withheld, participants commit fraud, governments meddle, and sometimes natural monopolies form. Unfortunately frequently the checks and balances aren't actually present. Absent such natural checks and balances capitalism would be a disaster for most people. If there are large profit margins it means that a competitor should start up with lower profits. If the demand for ebay's services increases, why shouldn't they be able to match demand with an increase in price?Įxcepting of course that the free market is a harsh mistress and in an idealized environment does not tolerate large profit margins. No, but throughout the majority of the world (even China is adopting it), supply and demand does.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |