DRAM Price Fixing Scandal

It's great that some of it is "proven" but it's the kind of things that don't need any proof, it's obvious that most companies are talking together or indirectly aligned their prices as it's common sense, why wouldn't they do it? I feel law is irrelevant for this, it won't ever stop.

We all do it under some form, if we want to open-up a new service, we will scout the competition and align prices with them and consider them as a base value, which is almost the same thing, that you decide in secret for it "together" doesn't change that the outcome is the same, most prices will be aligned, food is the same, drugs are the same, services in general are the same.

It would be very naive to think that most company owners don't "talk together", even when a major new player comes on the market with cheaper prices, other companies are often already aware of it, in the Bay area startups owner "collude" together all the time.

Pathetic attempt to gain some readers through high DRAM prices by linking old neverending story of 3 big DRAM manufacuters ... somehow trying to tie it to unrelated present prices.

Seriously, in preseng, price spike is pure result of offer/demand and massive backlog. And increased margins which can finance increase in production.

Except this time they are fixing the price with the customers.

Something that people don't seem to understand is that a system where negative yields are not permitted (e.g. negative interest rates), all capital must be at 100% utilization or be liquidated since idle capacity does not bring in revenue.

Since it is impossible to build a continuously scalable fab [0], the fab has a fixed maximum output with falling marginal costs. Since the price of idle capital has to be spread over the sold product, producing more means lower cost per unit as utilization of the fab increases and the percentage of unpaid idle capital shrinks.

The opposite is also true. If for some reason you can't find enough customers, your idle capacity grows which in turn means that you have to pass on the cost of the full fab onto the remaining customers, leading to higher prices, making your product even less attractive.

Now consider the case where one company's fab is at 90% utilization and another fab is at 50% utilization. If both were at 70%, there wouldn't be such a big problem, but if there is a big skew, the company with the higher utilization will have lower prices.

What this means is that both companies will scramble to maximize their utilization to undercut the competitor, leading to a glut in the market that will threaten both companies. The company with the highest utilization has enough customers to buy out the the companies with the lowest utilization, leading to an oligopoly or a monopoly. In the monopoly case, the company has enough monopoly power to raise prices to pay for the idle capital. In the oligopoly case, the industry members have to collude to create the collective monopoly. This makes commodity markets with many competitors unstable over the long run, with monopoly being the stable attractor.

When you think about it for a bit, the principle of competition by definition requires a unutilized capital surplus, otherwise choice was not possible. If 10 customers buy 10 products from 10 different manufacturers on a shelf, then there can be no meaningful competition, since one customer choosing one product means another customer has to choose a different product. There has to be some degree of overcapacity so that a customer can choose between the different companies.

This makes the concept of a zero lower bound on interest inherently incompatible with the idea of competition and all the good things people claim free markets will bring about. The absence of a truly free capital market will by necessity result in the real world economy mirroring the incomplete capital market [1].

[0] Neoclassical economists assume that all capital is perfectly divisible/liquid and can be scaled up or down instantly and all manufacturing use the most optimal process, thereby resulting in the assumption of permanent rising marginal cost.

[1] Under the assumption that the modern economy cannot be organized without money which primarily acts as infrastructure akin to telecommunication utilities and not "value storage". The fact that the monopoly nature of money rubs off onto the rest of society to encourage monopolies is just the boring logical conclusion of overregulated banking, central bank paranoia, the tendency of governments to avoid solving problems until they are too late and not the result of a conspiracy by shadowy elites or a popular scape goat (foreigners, people of a different religion, etc). The tendency for the average person to treat these interconnected problems as independent problems to maximize does not help since the citizens themselves are to blame for getting the system they so desire.