Thursday, September 20, 2007

When Supercrunchers Meet Antitrust

I am almost done with reading the fantastic book Supercrunchers, and here are some of my thoughts:

1) In the early days, if you want a suit, you go to the nearby tailor to get one tailored made for you. Boom, with technological advances come pre-made suits that come with all sizes. You just go to a nearby department store and pick the one that fits. Now with supercrunchers, it comes full circle once again where you have services and goods pre-selected and pre-packaged to serve individual needs.

2) But what interests me more is the possibility to pursue perfect price discrimination with the advent of supercrunchers. With that, it completely transforms the monopoly problem from one of efficiency to one of equity. The traditional textbook type argument for why monopoly is bad is because the firm will produce stuff at a level where price exceeds marginal cost. That is an efficiency argument. You cannot use that type of argument anymore now that perfect price discrimination is feasible. Distribution of gains between the producer and customer becomes the only relevant issue under such circumstances. What is interesting to see is whether the prevalence of perfect price discrimination will render it necessary to change at least part of the antitrust law

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