Thursday, October 04, 2007

The Tyranny of the Market?

When fixed costs are substantial, markets provide only products desired by large concentrations of people. As a result, people are better off in their capacity as consumers when more fellow consumers share their product preferences.

Small groups of consumers with less prevalent tastes, such as blacks, Hispanics, people with rare diseases, and people living in remote areas, find less satisfaction in markets. In some cases, an actual tyranny of the majority occurs in product markets. A single product can suit one group or another. If one group is larger, the product is targeted to the larger group, making them better off and others worse off.

The above is from Joel Waldfogel's forthcoming book The Tyranny of the Market. (有看林行止專欄的對 Joel 應不會陌生,他就是批評聖誕節交換禮物的傳统是浪費的那位經濟學家。)

Questions to Joel:

1) I just fail to see how the fact that others' wider product range compared with mine will affect my welfare. For that to go through, it seems you need to have a very specific kind of utility function.

2) Wouldn't there be incentives in the market to lower those fixed costs so that more consumers with preferences at the tail end could be served?

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