> on 27/12/94 Stever Robbins wrote:
>>> My understanding of capitalism (remember: I'm a technoweenie, not an
>>> economist or political "scientist") is that whoever builds the best
>>> product for the lowest price "should" win. In reality, there's an
>>> entire field called "corporate strategy" which is all about how to
>>> win through other aspects of the system: locking up distribution
>>> channels, building switching costs, tying competitors up in court
>>> until they go out of business, buying up patents for substitute
>>> products, etc.
> I think you missed the most important element - the customer. To
> persuade a customer to purchase a product is done by marketing. You can
> have the best product in the world and without marketing you cannot sell
> it. You can therefore forget all your corporate strategies until your
> marketing is sorted out.
Actually, there is some scepticism in the economic community about the
"best products" eventually winning. If the competitive situation will
settle to equilibrium, that would be true. However, apparently, this
is not the case, for example, like VHS being dominant in a market
where Beta-Max is less expensive to produce, more reliable, and does a
better job of displaying recorded video.
Apparently, This is not a pathological example, BTW. If you assume
that markets are in equilibrium, then monopolies can never exist since
they would be vulnerable to normal equilibrium forces. However, if you
assume that the market is a nonlinear dynamical system, then
monopolies like the ATT's, IBM's, and GM's will be an expected
outcome.
For a light treatment of the concepts, see:
@book{Waldrop,
address = "New York, New York",
author = "M. Mitchell Waldrop",
publisher = "Simon \& Schuster",
title = "Complexity",
year = 1992}
or:
@book{Casti:C,
address = "New York, New York",
author = "John L. Casti",
publisher = "HarperCollins",
title = "Complexification",
year = 1994}
For a more formal presentation, see:
@book{Morrison,
address = "New York, New York",
author = "Foster Morrison",
publisher = "John Wiley \& Sons",
title = "The Art of Modeling Dynamic Systems",
year = 1991}
or:
@book{Schroeder,
address = "New York, New York",
author = "Manfred Schroeder",
publisher = "W. H. Freeman and Company",
title = "Fractals, Chaos, Power Laws",
year = 1991}
or:
@book{Peters:CAOITCM,
address = "New York, New York",
author = "Edgar E. Peters",
publisher = "John Wiley \& Sons",
title = "Chaos and Order in the Capital Markets",
year = 1991}
I'm a technoweenie also, but I have been associated with some very
good marketing folks. These folks seem to have a sixth sense that the
market can be dominated through exploitation of the characteristics of
nonlinear dynamical systems. They have an instinctive intuition that
if you want a product to be successful, it has to generate an
infrastructure, or collateral in the market place, so that the more
you sell, the more infrastructure is generated, which in turn means
the more you sell, ... Bill Gates happens to come to mind as a case in
point-if MS didn't write the program, they wrote the compiler on which
the program was compiled. If they didn't write the compiler, then they
wrote the OS on which the program runs. Consider the infrastructure
that MS has in the computer world ...
-JCC
--John Conover, 631 Lamont Ct., Campbell, CA., 95008, USA. VOX 408.370.2688, FAX 408.379.9602 john@johncon.com