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Comment by xg15 | Hacker News Reader

Fully agree except for the "the consumer wants it that way" take.

The consumer "wants" this in the same way they "want" ad breaks, sugar-swamped food or addictive phone apps: It's the most shitty version of a product that a sufficient part of the population is still willing to pay money for, likely because there are other advantages that just so make up for the shittyness (or in the case of addictiveness because the product just manages to hack the consumer's brain).

This is all about serving the lowest possible quality for the highest possible price, nothing about that has to do with "preferences".

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Ah, I was using the term "revealed preference" which has a slightly more nuanced meaning[0].

In the colloquial sense, yeah, we all have a preference for "good pizza" and "cheap pizza." But those two things are generally a tradeoff: better pizza costs more. There exists some equilibrium point in the middle where either making the pizza better + more expensive or making the pizza cheaper + worse will reduce sales (within a given population), and pizza shops will tend to coalesce around providing pizza at that equilibrium.

The position of that equilibrium point is the "revealed preference" of a population. We might say we want better pizza than is currently being provided, but when we vote with our wallets, we (collectively) tend towards pizza that costs as much as it does and is as good as it is.

[0] https://en.wikipedia.org/wiki/Revealed_preference

But we can also pay for good, or expensive pizza, and we will find the box remains the same. If it were simply consumer preferences, then we’d expect this to no longer be the case as we enter more price-agnostic tiers of consumerism.

Unless of course no one cares about the box, so the increased cost literally does nothing, but that just means the improved boxes are not actually an improvement.

More specifically, don’t look at the market as a single unit, but as various buckets with various equilibriums. We expect Mercedes to target the equilibrium point… but not of the entire market (that’s what Jettas and Camrys are for) but rather their niche.

And all of the problems he talks about with the pizza are the result of this process applied to the pizza itself, not the box. Ingredient quality has plummeted, and the amount of sugar added is unbelievable. Some chain pizzas smell more like donuts that pizza.

And then there is cauliflower pizza dough.

> This is all about serving the lowest possible quality for the highest possible price, nothing about that has to do with "preferences".

I'm trying to follow this logically. Are you saying that if there were two options for a burger right next to another; say a McDonald's and a 5 Guys - the choice to buy a cheeseburger from 5 Guys instead of McDonald's has nothing to do with my preferences? I can come up with at least a dozen criteria for which the 5 Guys burger is objectively superior to the McDonald's offering, but choosing to pay more for that objectively superior product does not reveal preference?

You gonna pick McDonald's instead because the Five Guys burger box is cheaper and doesn't function quite as well? Should we take your still choosing Five Guys as a sign that you prefer that box?

Yes. exactly. Quoting GP:

> the revealed preferences of consumers for those things is the cheaper version, not the better version.

No, you cannot pick out the preference for one component of the offering that way. If there'd been a 5-cents-higher option with the better box, they might have chosen that. You can only compare the entire offerings—convenience, quality of all components combined, cost, customer service, and so on, and say that that entire bucket was what they preferred to the other entire bucket.

Well, with non-diversified commodities, in a market with instant arbitration and universal complete knowledge about the products the Econ 101 models work.

On the real world, they don't.

This reminded me of the 1/3 pounder burger. The actual preference of consumers was for a larger burger (or cheaper relative to size). The so-called "revealed preference" is that half of the consumers were bad at fractions.

https://culinarylore.com/food-history:aw-1-3-pound-burger-fa...

"The firm conducted a focus group and found that around half of the people surveyed thought that the A&W 1/3 pound burger was smaller than McDonald’s 1/4 pounder! “Why should we pay the same amount for a third of a pound of meat as we do for a quarter-pound of meat?” they said."

>This is all about serving the lowest possible quality for the highest possible price, nothing about that has to do with "preferences".

Competition leads to the opposite, and I don't see any tangible argument for why it would be otherwise in this case. Like with the cranks you run into online who claim they've discovered flaws in the paradigms of physics, it's the burden of the internet commenter to provide evidence alongside their claim, in my view.

Competition leads to the opposite in an idealized free market.

What we have is not a spherical market cow in a vacuum; it is a real live market with all kinds of non-ideal aspects to it. The biggest one of those is the gradual transfer of wealth from the poorest among us to the richest over the past several decades. This means that the poorest X% of consumers are vastly more price-sensitive than they would be if the productivity-to-wage ratio had remained the same since the mid-'70s.

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