A way to understand it is that, under US antitrust, it’s dangerous for participants in concentrated industries to restrict “ordinary” supply, but nothing prevents them from designing *inflexible* supply. i/

re @glastris washingtonmonthly.com/2022/01/12/pre…
Inflexible supply has two desirable characteristics:

(1) it’s cheaper and narrowly more “efficient” to arrange, reducing costs and increasing profit in ordinary times; and

(2) it offers firms a convenience yield in the form of pricing power during spikes in demand. ii/
When there are spikes in demand, the structure of production forces the very supply restrictions that an antitrust regulator would otherwise attack. You get thrown by circumstance into the briar patch of the old-school profiteering US antitrust still plainly forbids… iii/
but you can claim it’s not your fault, you’re doing the best you can, what are you supposed to provoke a shortage by selling too low a price? iv/
the foul here isn’t the pricing during the demand spike itself, but *choosing and designing a low price elasticity of supply* production system, bc it’s cheap up front and bc you know when it “fails” it’ll do so in a way that will be profitable, not costly, to your firm. v/
antitrust, or industrial policy more broadly, should have as its goal *ensuring production arrangements with a very high elasticity of supply throughout the economy*. vi/
how best to regulate to encourage this is a complicated question, but far from intractable. you might, for example, design a tax that would eliminate or turn negative the convenience yields that firms in concentrated industries earn because of inability to promptly vii/
expand supply.

(in very competitive industries, there is no such convenience yield: a firm’s failure to expand supply translates to loss of market share rather than higher prices.) /fin

p.s. long long ago i wrote an explainer of convenience yields: interfluidity.com/v2/133.html

• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with Steve Randy Waldman

Steve Randy Waldman Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @interfluidity

4 Jan
.@MattBruenig suggests a very direct form of competition policy: when an industry is concentrated, have the state buy and manage one of the oligopolists in the public interest. peoplespolicyproject.org/2022/01/04/why…

Two concerns immediately spring to mind:

(1) How do you set the price of the acquisition? (The premium demanded over prior-to-government-interest market cap will be very high if you just let the sellers name their price.)

(2) As an institutional matter, how should such a firm be managed, so that it neither behaves as a pure profit maximizer (which would just continue the oligopoly squeeze) nor is captured by one stakeholder (industry peers, vendors, customers) at the expense of others?

Read 4 tweets
1 Jan
When demand increases, two things typically both happen: quantities supplied increase and price increases. There is a name in economics for the quantitive relationship between these two effects: "price elasticity of supply". 1/
A good "infinitely" elastically supplied would see no price change at all in response to an increase in demand. All of the effect would be absorbed by an increase in quantity supplied. 2/
A good completely inelastically supplied would simply be price-rationed. In response to an increase in demand, no additional units would be produced at all, the fixed quantity supplied would just be allocated to the highest bidders, pushing all response into price. 3/
Read 13 tweets
4 Dec 21
there’s a sense in which Donald Trump’s administration was the best thing that could happen to the professional-managerial class that most loathed him. he drew all kinds of fire that otherwise would turn towards them. 1/
i just listened to @LRCkcrw, and (on COVID stuff) it might have been Rush Limbaugh talking, the way all three of (“left”) @ebruenig (“right”) @DouthatNYT and (“center”) @jbarro used the term “bureaucrats”. castro.fm/episode/4N02rT 2/
i found this particularly striking with respect to @jbarro, who five years ago, in the wake of Trump’s election, became a pretty full-throated defender of elites and deference to elite guidance. 3/
Read 12 tweets
5 Oct 21
This essay by @VitalikButerin, in dialog with @nathanairplane, is very good. I'll highlight two points I already agreed with, and a third which is new to me, interesting and creative. vitalik.ca/general/2021/0… via @KlingBlog 1/
So often people tell me that, sigh, the root of human suffering is coordination problems, that if only we could overcome our prisoners' dilemmas, what a better world we'd have of it. This misses a crucial point @VitalikButerin makes. 2/
The bones of nearly all functional social institutions are coordination problems. We rely upon them. No government wld be stable if incumbency + existing procedure weren't a hard-to-reroute Schelling point. Market competition depends on diverse producers failing to coordinate. 3/
Read 16 tweets
9 Sep 21
@rplzzz nothing to apologize for! i don't think you'll be surprised i see it differently. if we're in a game with two sides, they are better characterized as "activists" and "everyone else" than left vs right or trumpist antivaxxers vs the rest of us or all of that. 1/
@rplzzz most of the unvaccinated are not diehard (they die too easily) political intransigents. yet most are either attached to minority communities or trumpish political communities. but most of the unvaccinated attached to trumpist political communities are not politically motivated 2/
@rplzzz intransigents, but when they are surveyed express a broad range of hesitancies not dissimilar from those of minority communities — prefer to wait and see, don't want to be guinea pig, not so worried about COVID, can't afford time off for side effects — etc. 3/
Read 19 tweets
24 Jul 21
polio vaccination is often performed sequentially, first with a very safe inactivated virus vaccine, then with a riskier attenuated live virus. the first vaccination renders the second one much less dangerous. cochrane.org/CD011260/BEHAV… 1/
given the extraordinary transmissibility of delta and frequent reports of usually mild “breakthrough infections”, i wonder if the end game here is that we’ll be dragged involuntarily through an analogous protocol. 2/
the role of vaccination becomes not to prevent infection, but to ensure the infection that eventually (hopefully) deepens and completes our immunity is very mild. 3/
Read 8 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!


0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy


3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us on Twitter!