Comment by simonh | Hacker News Reader

Comment by simonh | Hacker News Reader

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There’s nothing wrong with buying competitors or offering lower prices by themselves. That’s fine. The problem with railroads is they impose a heavy cost on society by occupying a lot of territory. Railroads are noisy, polluting, obstruct highways and other transport and infrastructure. Every town wants a railway, but no town wants two competing mutually redundant railways providing the same service with two sets of track and stations.

Many other utilities tend to natural monopolies in similar ways such as telephone service, especially to rural areas, but railways are an extreme case.

Online some network effects can create natural monopolies because users get benefits from being on the same platform as all the other users. It’s a very different dynamic though and different platforms can cater to different communities and use cases with complementary value. Twitter and Facebook for eg. They don’t impose a cost on the public in the way railways do either.

> Twitter and Facebook for eg. They don’t impose a cost on the public in the way railways do either.

That's an interesting take after the last couple years...

I understand what you mean, but I have a natural aversion to blaming the messenger. We're all personally responsible for what we say and do.

In an age of hyper-sophisticated algorithms for which our puny mammal brains are no match, I think that's less and less true.

> but I have a natural aversion to blaming the messenger.

The messengers in question decide which messages you see and tailor their deliveries to the one which will increase your outrage because that’s what keeps you asking for more. All so they can keep slipping in a few more adverts others pay for.

These messengers aren’t neutral, thus not exempt from blame.

No. Offering Lower prices than is economically sustainable and viable is predatory and anticompetitive. In international trade it is called “dumping” and is illegal. Just because companies are getting away with it doesn’t mean it’s ok.

I don't know, I found the argument about competing railways in one town compelling. What if I as a consumer like the "dumping"? What if most of us do?

I'm not actually making that argument, I was thinking in terms of economies of scale or just that some features or services are so cheap and incidental for a huge player that they end up squashing minors almost by accident. In those cases you can make a case they are doing harm, but being alive causes harm (environmental for example). You've got to draw the line somewhere.

Dumping is tricky. I am actually sympathetic to the argument that says let them dump away. If China is subsidising cheap solar panels and manipulating their currency to make them even cheaper again, fine. Let's gorge ourselves on cheap solar panels. That's fine in theory, but the reality is more complex. What about long term investment in technology development? Control of strategic technologies? These apply to tech services too. I use Google Doc heavily, but I do worry that they are pricing out potentially innovative competition.

The problem with dumping is that in the long term it will put competitors out of business, facilitating a monopoly for the surviving company which can then charge permanently higher prices and stifle any competition before it can get off the ground. So while there may be short term benefits the long term consequences are awful for consumers and reduce innovation.

> What if I as a consumer like the "dumping"?

What if as consumer you benefit for a little while until all competition is dead - and then prices increase beyond prior levels? Will you still like “dumping” then?

I think the dump and pump argument is more theoretical than real in a case like this. Pump and dump only works on short time horizons.

A bigger worry for me is stagnation. Suppose Google Docs gets 'good enough' and prices out all the competition, but then Google loses interest because it's not exciting anymore.

This happened with Internet Explorer. We lost years of advancement in browser technology because they dominated, wiped out the competition but then lost interest. Yes competitors came along again after a few years, but there was a significant opportunity cost to all of us.

People are totally willing for cheaply made furniture, appliances, etc.

That’s not dumping.

This is: https://en.wikipedia.org/wiki/Dumping_(pricing_policy)

While the means may be different the goals are the same:

"The objective of dumping is to increase market share in a foreign market by driving out competition and thereby create a monopoly situation where the exporter will be able to unilaterally dictate price and quality of the product".

The word “dumping” in this context is a well defined term, not a colloquial English word.

Making cheap products from cheap materials (at a presumed profit) isn’t the same as loss-making pricing schemes even if the high level motivation to beat competitors is the same.

The marginal cost of storage is quite small. “Dumping” and “predatory pricing” arguments make more sense for physical goods — competitors like OneDrive or Google Drive could easily make the case that Dropbox is a premium storage service that does not reflect the true cost of storage.

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