Two approaches to "the market"

Post #7,455 by Andrew Grygus 9/1/01 12:37:56 PM Reply	Two approaches to "the market" Addison subscribes to a narrow academic model where the problem is simplified to the point where calculations can be made. Everything is eliminated but supply, demand and pricing. Anything else is by definition "external" to "the market". Now all you have to do is determine the supply and the demand to predict pricing, or supply and pricing to determine demand. I subscribe to a marketing model where anything and everything that affects selling the product is a "market force", including weather, shoplifting and the shifting sands of "fashion". Should I write a textbook on "market forces", Addison and associates would can it as the ravings of a demented crank. Should any business try to market in accordance with Addison's definition, it would be reading Chapter 7 pretty damned fast. For a view of both approaches in action, have a look at this fall's "back to school" clothing market for young men. There is a great deal of supply and no demand at all, and pricing is sure to follow theory. This is due to a fashion misjudgement by the clothing industry. Young men are haunting "closeout" stores in hope of finding some of last years stuff. Addison would consider fashion an "external force disrupting the market", and I would consider fashion the primary "market force" because it has totally distorted the supply / demand ballance. [link\|http://www.aaxnet.com\|AAx]
Post #7,457 by addison 9/1/01 1:14:28 PM Reply	Re: Two approaches to "the market" Addison subscribes to a narrow academic model where the problem is simplified to the point where calculations can be made. Not at all. Everything is eliminated but supply, demand and pricing. Anything else is by definition "external" to "the market". Pretty much, yes. That's the basic market. LOTS of things AFFECT those, but those are what its about. Should any business try to market in accordance with Addison's definition, it would be reading Chapter 7 pretty damned fast. Hrm. Last I checked, there were lots. Doing exactly what you say they can't. There is a great deal of supply and no demand at all, and pricing is sure to follow theory. This is due to a fashion misjudgement by the clothing industry. Young men are haunting "closeout" stores in hope of finding some of last years stuff. Let me get this straight. So since there's no demand, price is going down (just as would be predicted), and since there's demand for the (older stuff), the price is going up, and I'm the one talking out my ass? That's exactly what these idiots you're sneering at would have predicted. Addison would consider fashion an "external force disrupting the market", and I would consider fashion the primary "market force" because it has totally distorted the supply / demand ballance. How about you ask, rather than state authorititatively what I would think? I'd suggest taking an econ class, but since you're still insisting that you had NO part in making the Microsoft monopoly, I'm not expecting you'd learn much. :) (for anybody else) Fashion and other things affect supply and demand. As do elasticity, switching costs, and many other things. Some things can be modeled. "Fashion" is about impossble, since its subjective. But the effect of "Fashion" is to change the DEMAND curve - as Andrew noted correctly, in his incorrect assesment, thus changing the price where it crosses the Demand curve. Addison
Post #7,458 by addison 9/1/01 1:15:40 PM Reply	BTW: Anybody who would like to DISPROVE what I just said - do me a favor. Show me. Show me the graphs where you're talking about something else. I won't say you're wrong, ahead of time, but I want you to SHOW me what you're saying. Don't just insist that something exists. Show me. Personally, I expect you'll find that you're drawing supply/demand curves.. and that either one, or the other, is being moved. Addison
Post #7,460 by Andrew Grygus 9/1/01 1:55:31 PM Reply	Which is why you adhere . . . . . . to the narrow academic definition - you demand graphs and charts. Anything that can't be charted is by definition an "external influence". Of course any chart presented will be just a supply/demand/price chart, that's the only part that can be charted - how do you chart fashions, for instance, or the antics of legeslators? If your model worked in the real world, companies wouldn't have marketing departments, they'd just have a computer program, but those pesky, unchartable "external influences" can (and often do) have an overwhelming influence on the demand variable (and sometimes the supply variable) of your supply/demand/price calculations. Valid supply/demand/price calculations tend to be "after the fact" - after the "external influences" have already had their way with the market. It's up to the marketeers to try to anticipate those "external influences" - to the marketeer, those are the primary market forces. Sometimes they get it right, sometimes they don't, it's not something you can graph. [link\|http://www.aaxnet.com\|AAx]
Post #7,464 by addison 9/1/01 2:56:56 PM Reply	Which is why I asked... You to show something. Of course any chart presented will be just a supply/demand/price chart, that's the only part that can be charted Let me get this straight. You're insulting me because I've said that according to economic definition, you can only chart this, thus its what you measure. Now you're telling me its all you can. - how do you chart fashions, for instance, or the antics of legeslators? The question for you was how do you do that. To answer your question, since you won't, is that those are "shifts in the supply or demand curve". Fashion shifts demand. Doesn't touch supply. Legislation can affect either - or impose a artificial equilibrium out of whack with the "natural" eq. If your model worked in the real world, companies wouldn't have marketing departments, The model does work in the real world. Heard of "economies of scale?" What about "super buys" at your local store? Companies want to maximize their profits. Marketing is an attempt to get you to buy THEIR product, pay their premium, for some reason. You don't need to market when there's not competition. Marketing surely exists - BECAUSE (YET AGAIN FOR THE HARD-OF-READING) THERE'S NO SUCH THING AS A TRUELY FREE MARKET. There isn't perfect knowledge. There isn't complete elasticity, there aren't infinite suppliers and buyers. Differing people have differing demands. Personally, I don't give a flying fig about Tommy Pull-my-finger crap. I don't buy it. I buy generic, good clothes. Want me to buy your clothes? They've got to be in my price point. Other people put more of a premium on these things. Does this change the basic point? Nope. Means that there's a shift, and even then, you can even put up a S/D curve on fashion items. I have a cousin who only buys/wears Nike stuff. But there are still things he can't afford, he has a S/D curve for that stuff. Fashion, with a S/D curve. Now, if you want to tell me I'm wrong, get your cerebrum in gear, and SHOW ME. Right now you're telling me I'm wrong, because I'm right. You can chart fashion - people make quite a lot of money doing exactly that - because it shifts the Demand curve up, without increasing the costs more than the increased profits. Or sometimes not, witness the dot-com failures, where they didn't have the S/D curves right - no matter how fashionable. In short, you don't understand the econ theory.... If you'd start to, you'd stop telling me I'm wrong. :) Addison
Post #7,465 by Andrew Grygus 9/1/01 4:10:50 PM 9/1/01 4:25:28 PM Reply	How "Super Buys" work . . 1. Superstore A negotiates huge lot toilet paper deal at the best price and terms they can get from manufacturer B. 2. Superstore A does a "special", bombs the toilet paper at cost or less, and moves the whole buy in one week. 3. Superstore A invests the money they owe to manufacturer B in money market, Eurodollars, or whatever investment is hot at the moment. 4. Superstore A drags payment to manufacturer B for 90 days or more and pockets the money earned. With enough simultaneous deals going, that can be significant income, plus it brings people into the store, and they're likely to buy some of the profitable stuff while they're there. "We lose money on every sale and make it up in volume" is literally true. And a couple of other things: 5. Since superstore A is selling so cheap, retailers C,D,E,F and G have reduced sales and reduce their orders to manufacturer B. 6. Since orders from other retailers have dropped, manufacturer B is desparate to meet their quarterly sales figures, so when superstore A comes back for another round, they're all ready to lube up, bend over and get screwed again - just a little deeper this time because they've become more dependent on superstore A. 7. Finally, manufacturer B files Chapter 11 because of low profit and cost of money to float receivable for 90 to 120 days. 8. Manufacturer F is approached by superstore A. Manufacturer F's sales have been down because all the volume has been going to manufacturer B, so they're all ready to "make that big deal" to meet their quarterly figures. Lube up, bend over, repeat until done. [link\|http://www.aaxnet.com\|AAx] Edited by Andrew Grygus Sept. 1, 2001, 04:25:28 PM EDT Expand All History
Post #7,468 by Ashton 9/1/01 5:12:49 PM Reply	Hey! I think I see a 'graph' in there________:-\ufffd Or maybe just an epitaph.. Blessed are the numerologists, for they shall chart their demise - after the integrated vastly complex Real Market (the world of random homo-saps) makes it happen - to 6-digits of precision. And.. it will look so Kewl! on that Power Point demo to the auction house, of the er 'recoverable assets': the 95.2312% of the Hill-O'Fingers Transistorized Banana Corer, still 'in stock'. Ahhh.. numbers are so sooothing, so like P&G Ivory soap's crooning of, 99 and 44/100ths percent Pure.. It Floats !! (Hey! it sold a lot of soap!) 3.1415928... ah it's almost as satisfying as a Real Pi(e), except in the stomach, of course. Ashton 99.87234% Sure! that Certainty is a chimera - and not only in regular religions.
Post #7,470 by Andrew Grygus 9/1/01 5:56:44 PM Reply	Adventures in marketing #48734655j A century ago in a soap factory, a production mistake was made. A mixing machine was left running for way too long and ruined a batch of soap. The soap had stiffened and a lot of air got worked into it. Production now had a very large and very "odd" batch of soap on their hands. They called in marketing to see if it could still be sold - a full scale new product introduction campaign followed immediately. You see, due to the fscked up processing, the soap floated. Further, due to the air in it, it disolved faster than regular soap, a convenience to the user, but one which would cause them to need to buy soap more often. This is like the much earlier case in France, where the baker's apprentice, after preparing a large batch of dough, realized he had forgotten the butter. Desperately, he folded in the butter, but the dough was lumpy, so he rolled it out and folded it again and again until it finally looked normal. It looked normal, but it didn't bake normal. The boss cornered his apprentice and sternly asked what had happened, and the kid confessed. He was not punished, however, because the baker was a marketeer, and launched the puff pastry industry, making possible the croisant and other popular products. Disclaimer: the puff pastry story may or may not be true in reality (but if it isn't it ought to be). The soap story is true. [link\|http://www.aaxnet.com\|AAx]
Post #7,469 by Ashton 9/1/01 5:38:24 PM Reply	Or, for the 'engineering model' Hey! I've got a model for The Car - tells ya everything you need to know about making one: ______......______ \|Box A \| + \|Box B \| = The Car \|_____\| + \|_____\| What's in box B? transmission, clutch, drivetrain, wheels - simple! What's in Box A? The Engine - simple! OK.. I see how the principle of the lever covers gear ratios and, friction reduces power and.. wheels turn - all that B stuff. But what's in Box A? Oh, Laffercurves and Cost/Benefit ratios and extrapolated depreciation on the mean replacement cost and ... ^h^h...etc. I mean! er, gasoline, air, metal, rubber, water, glycol, electrons, sludge, varnish, carcinogens - why ya wanna know all that stuff? But how does The Engine work? Nobody Knows, but we call it: 'Economics' and.. we can graph it to a fare thee well. It's enough. We've got the $; we make the rules. I don't see how the Engine WORKS! Look kid, if you wanna pass this course and get that MBA and start playing Solitaire in that corner office, in yer Regimental-striped tie - before Wednesday golf with the Doctors? Shut up and mark those boxes [T][F]. Oh, sorry - guess I don't need to know Everything! Open Book quiz at 11:00:12.72 Bring your calculators; no essay questions allowed - and NO PENCILS. It's Power Point ONLY Class dismissed [click] Class dismissed [click] Class dismissed [click]
Post #7,471 by Andrew Grygus 9/1/01 6:52:49 PM Reply	No problem - it's "Faith Based" [link\|http://www.aaxnet.com\|AAx]
Post #7,582 by wharris2 9/3/01 7:11:36 PM Reply	Missed item Cost leaders. Superstore A has a great deal on toilet paper, but gets revenue on whatever else teh buyer may buy at the store. French Zombies are zapping me with lasers!
Post #7,598 by boxley 9/3/01 9:23:43 PM Reply	dollar stores also things you would never consider going to the store for but they are only a buck. thanx, bill Our bureaucracy and our laws have turned the world into a clean, safe work camp. We are raising a nation of slaves. Chuck Palahniuk
Post #7,601 by Andrew Grygus 9/3/01 9:41:16 PM Reply	No, I got that . . . . . paragraph under item 4. [link\|http://www.aaxnet.com\|AAx]
Post #7,499 by bepatient 9/2/01 1:24:22 PM Reply	Boys boys boys.... There are ALOT more factors than Supply and Demand...(pricing falls from these 2...and is thus derived...in >theory< :-)_) BUT...I feel inclined to poke my head in here... Weather, shoplifting and fashion ARE market forces...because they relate to how product cost or material supply is derived. Bad weather does indeed affect the supply of citrus fruit...for example. Shifting fashion sense has certainly reduced demand for double-knit polyester leisure suits...has it not? HOWEVER...this thread, IIRC, began by someone trying to call government intervention a "market force". THIS...is not correct. While government intervention does indeed affect the market...by economic definition it is NOT a "market" force....but an external influence to the "market"...needed to ensure an adequate supply of "public" goods that would NOT be produced by the market itself (national defense...pollution control...etc...) AND...just to make another point...I can graph a shitload more stuff than just supply and demand...there's resource allocation, indifference, marginal outputs, interest rate and fx affects on money, money multipliers... Only Father Guido Sarducci can get away with all of econ being supply and demand based. You were born...and so you're free...so Happy Birthday! _{Laurie Anderson} [link\|mailto:bepatient@aol.com\|BePatient]
Post #7,508 by Ashton 9/2/01 4:30:42 PM Reply	Now don't spoil it, BP By introducing rational qualifiers. My guess is that the visceral antipathy to all the boffins is - that they tend to perpetuate the idiotic ideas that (say) A) The Market is... anything other than a highly idealized er 'massless rod of length h'. B) That its entire dynamic may be expressed in mathematical model, displayed in 2D or nD 'graphs' -- which 'explain' it all. (Though unlike the scientific ideal: rarely predict events with more than owl-entrail accuracy) Agreed that we 'want' Some methodology a bit better than owl-entrails; it's our nature to seek explanations (some folk even imagine there's an ontological 'proof' of er God!). I suggest that the concept 'market forces' is simply an open-ended labelled container into which, with perfect 20/20 hindsight: are tossed each new factor as was seen to have affected That particular run-up or run-down; factors as varied as The Weather and - Imagine an idea, sufficiently sophisticatedly noised about that: The phosphorous in Coke (the liquid kind) + the accumulated random DNA from the millions of steer carcasses intermixed into any one Big Mac: are asymptotically approaching a certain date (elapsed time) ~ a la Code Red algorithm - at which time flaming kidney stones shall appear in millions of fast-diners, all within a likely window of just 'weeks' = excruciating pain! (How many $B support, feed-off UFO sightings overall?) Economists thus purport that their algorithms work, yet that 'market forces' container is as malleable as gold leaf hammered between leather sheets. It's no nearer a science (however unarguably it is Dismal) than is 'socio'logy; but it must pay well, and soothe lots of CIEIOs - and after all they Are the most important ones to buy the snake oil: they own most of the stuff (even the patented ideas!) [/Aummmm]: Dollllarrrrzzzzz Unite against the Dismal Doctors of Deception D\ufffd ? Don't be a Rube !!
Post #7,661 by drewk 9/4/01 4:35:31 PM Reply	How much is this a semantic argument? While government intervention does indeed affect the market...by economic definition it is NOT a "market" force. Someone (Ashton?) recently brought up the concept that professions are just the way to keep non-professionals from playing your game through the use of technical jargon. I'm not an economist, but a layperson ... one who pays attention. It seems there is some disagreement even from the people with formal training in the field as to whether government intervention should be classified as a "market force." To the extent that anything that affects the market is a market force, it is. To the extent that the "idealized market" only consists of supply, demand and price, it isn't. The "truth" must lie somewhere in between. My understanding, as I said in my other post, is the simple Supply/Demand graph, and that everything else is just inputs into determining these curves. The simple chart, by itself, is not predictive or useful. But even at this level of understanding, I see government intervention -- in the form of patents, anti-trust regulation, price fixing, nationalized industry, etc. -- as fundamentally different from buyer/seller inputs. In this sense, supply is the idealized end-point of all inputs involving the seller, and demand is the end-point of all inputs involving the buyer. IMO government input is still orthoganal to these forces. I suspect that Addison's viewpoint is farily close to this. FWIW I believe that's the "proper" way to view government input since "the government" is theoretically a representative of "the people," which should include the buyers and the sellers. Slightly OT: A gas station franchise owner in Alabama (he only has one station) has sued OPEC under anti-trust legislation for price fixing. At the first hearing, OPEC didn't appear and the judge entered summary judgement on behalf of the plaintiff. Another judge has set aside the verdict, and a second round is under way with OPEC taking the matter somewhat more seriously. The US Attorney isn't weighing in, claiming they don't have a mechanism to pursue the case. OPEC's position is that the plaintiff has no standing to pursue a multinational, due to sovreign immunity. They are explicitly holding themselves up as equivalent to the U.N., as deserving of immunity to local prosecution. This is my sig. There are many like it, but this one is mine.
Post #7,668 by bepatient 9/4/01 5:03:41 PM Reply	Definition... I can understand why the confusion exists. Public finance (government intervention in the economy) is a couple of full time courses in economics. The basic principle is that "market" forces are those inherent in the interaction between the "suppliers and demanders"...where government intervention is "enforced" on the market from the outside. Both have influence on the derived outcome of the market...so the net effect is pretty much the same. So... ...I understand both points of view...but to really be true to my school...have to split laws and other government issues away from the naturally occuring "market". You were born...and so you're free...so Happy Birthday! _{Laurie Anderson} [link\|mailto:bepatient@aol.com\|BePatient]

Welcome to IWETHEY!