The researchers, physicists Tiago P. Peixoto and Stefan Bornholdt of the University of Bremen in Bremen, Germany, have published their study, called “No Need for Conspiracy: Self-Organized Cartel Formation in a Modified Trust Game,” in a recent issue of Physical Review Letters.
“Our work shows that, under very reasonable and simple assumptions of the market dynamics, cartel-like behavior can emerge, without an explicit agreement between sellers,” Bornholdt told Phys.org. “This is, to our knowledge, completely new and we feel that it comes somewhat unexpected, for example in the context of German gasoline price discussions in the media. For example, a few months ago, the German governmental cartel agency searched the offices of large gasoline companies in search of evidence of cartel behavior. We asked ourselves if a cartel-like dynamics could emerge by itself, without leaving traces of evidence. As gas prices in Germany were – and still are – strongly fluctuating in time and space, this made us curious whether this could be a sign for an interesting collective dynamics, of gas sellers, interacting with each other in a funny way.”
The spontaneous emergence of cartel-like behavior appears in a model that the researchers developed, which is based on a real-life market scenario. The model involves one million agents, each of whom has the role of both buyer and seller of a necessary commodity, such as groceries or (for drivers) gasoline. As buyers, the agents must buy the product in question, but they can choose which seller they buy from. As sellers, the agents can set their price, knowing that too low of a price will not make them much profit, and too high of a price will drive buyers away to another seller.
As the game evolves, buyers and sellers continuously update their strategies: buyers change where they shop by comparing prices, and sellers raise or lower their prices by replicating the prices of other sellers who have higher profits.
The key variable in the game is who can update their strategy the fastest. If buyers can update their strategy at a fast rate relative to sellers, the model shows that the pricing favors the buyers. Since the sellers offering the lowest prices will profit most, other sellers will replicate these low prices until all sellers have the same low price.
But if sellers can update their strategy at a fast rate above a critical value compared to buyers, then the entire population of sellers benefits at the expense of all the buyers. This is because the sellers are quick enough to copy the high prices of more profitable sellers before the buyers have a chance to react. Soon, there are no low-priced options available, marking the emergence of a cartel-like phase.
“Our work shows that the deciding factor for whether a cartel can self-organize is the relative speed of buyers in comparison to sellers in updating their strategy,” Bornholdt said. “For consumers, price comparison websites and smartphone apps can be a potential means to react more quickly to price changes. If a global and real-time ranking of sellers is available, this could significantly thwart a cartel-like scenario. Note that the mere existence of such catalogs is not enough, it has to be used by a significant portion of the buyers; otherwise it has no effect, since a small number of buyers will not be able to benefit from it in the long run.”
Unlike the first scenario where prices settle at a stable low point, in the cartel-like scenario the model shows that the high prices fluctuate tremendously due to the ongoing competition among sellers, sometimes dipping down to reasonable prices. The price fluctuations are highest at relative strategy update rates close to the critical value, demonstrating typical critical behavior. When the sellers’ strategy update rate far exceeds the critical value, the price fluctuations diminish somewhat, but remain significant.
The model also shows another interesting feature of these price fluctuations: the average price often rises very quickly and decreases more slowly. This type of oscillation, called an Edgeworth price cycle, is often observed in real life and can be predicted by simple models when just two sellers are involved. In contrast, the model used here incorporates numerous sellers as well as the impact of buyer behavior, providing a more realistic system. Nevertheless, the researchers explain that using the model to predict future prices would be difficult, since the price cycle dynamics are aperiodic and not easily predictable.
However, the results could still be useful for market regulation, where regulators often discuss whether price fluctuations result from collusion among companies in an attempt to increase profit. If sellers are just quick to individually update their pricing strategies, then high gas prices may simply be a natural result of the market. The researchers plan to improve the model in the future.
“The model can be made more realistic in a number of ways, in particular by implementing spatial constraints (a cheaper gas station which is 100 km away is not a viable option),” Bornholdt said. “Spatial constraints can sometimes significantly alter the dynamics in this type of system.”
Explore further:
Established eBay sellers get higher prices for good reputations
More information:
Tiago P. Peixoto and Stefan Bornholdt. “No Need for Conspiracy: Self-Organized Cartel Formation in a Modified Trust Game.” Physical Review Letters 108, 218702 (2012). DOI: 10.1103/PhysRevLett.108.218702
R2Bacca
ryggesogn2
TkClick
Telekinetic
Telekinetic
The concept of parallel universe(s) is NOT widely accepted in physics, but is gaining ground. Eastern Europe was the source of great strides in chemistry and physics, but research was also suppressed in the satellites of the Soviet era. You need to break free of that for your own personal evolution as a scientist.
sigfpe
> Any other industry or commodity would be shut down for the same violations
If there isn't a monopoly, and there isn't collusion, then in the US sellers are generally free to sell commodities at whatever price they like without being shut down and without having to lobby the House and Senate.
freethinking
ryggesogn2
What were their sales? What was their profit RATE?
How much did the govt collect in taxes on those sales?
Most socialists are.
tpb
But, there is a monoply/cartel (OPEC) which controls production and world prices.
Our companies sell on the world market and base their prices on the world market, not on cost of production.
Telekinetic
And there IS collusion- between the oil companies and the corrupt lawmakers that Americans have put their trust in.
Telekinetic
We progressives also believe in education for all, so that everyone will know how to spell "banning" correctly.
freethinking
VD Please name the Economists who have said it is moral and proper for corporations to steal?
I agree Americans are easy to fool, they voted for Obama didn't they, but they do wise up after a while. Now that they have seen what radical progressive looks like and have seen their hate and distructive ways, and no longer believe their lies, they are swinging back to sanity. November will be the proof of that!
Telekinetic
It's spelled "grammar" and "destructive". If you want to be taken seriously and not be thought of as a fifth grade dropout, take some remedial reading classes, otherwise whatever you write I tend to dismiss out of hand.
Job001
krundoloss
Thats exactly right. In a normal market, lets say, sunglasses, someone says "Hey I can make sunglasses for cheaper than everyone else, and Im willing to take a smaller profit on a larger scale so I will sell them for cheap." Meanwhile, the oil companies say "I can produce/extract this oil for a certain amount, I can store large quantities of it, and I can charge the same or slightly less than everyone else and make lots of money. Why would I sell it for less?" The oil companies prices are based on the world market, but they set their prices to take full advantage of any situation. A prime example is when Hurricane Katrina hit the Gulf of Mexico, and within 24 hours gas prices went up all over the place. Was the supply affected immediately? No. But their prices are set by the market
Telekinetic
In this instance it is considered "price gouging", when a necessary commodity is inflated during an emergency and is ILLEGAL. Oil companies and distributors should have been prosecuted, but their buddy, George W., an oilman himself, did absolutely nothing. Know your history before using it to bolster your argument.
freethinking
For the progressives that have problems with my spelling, I hate to let you know but your not important enough for me to spend much time spell checking for you. I run two successful businesses.
That said however, Einstein and I have at least two things in common. 1. both of us are poor spellers, and both of us cant remember phone numbers. So if VD wants to suggest poor spelling makes one stupid, then I'm in good company with Einstein.
At least I'm not like VD who sits in his parents basement spell checking every word he types, between his mom yelling at him to clean up his room, trying to make himself look smart.
krundoloss
Dude, you are agreeing with me. I think its price-gouging too, there just nothing to stop them. That was my point.
ryggesogn2
This is not gouging.
Such pricing is the best way to ration necessary commodities.
If there were a shortage of bottled water in NO, which their was, companies like Wal Mart DONATED time and water for relief.
But, if a bottle of water was $10, how many companies and entrepreneurs would be shipping has much water as they could at that price? And with such an influx of supply, the prices would quickly drop.
From the consumer side, such price increases would signal they should conserve and not waste such a costly resource.
Gouging laws make socialists feel good and prolong the shortages of valuable commodities.
Telekinetic
Illinois Attorney General Lisa Madigan last month sent letters to 18 gas stations informing them that they could avoid being sued for alleged violation of consumer protection laws by donating $1,000 to the American Red Cross and signing an assurance of voluntary compliance -- essentially an admission of price gouging."- ABC News 1/4/2005
krundoloss
ryggesogn2
Sounds like socialist blackmail. Typical.
ryggesogn2
"the post-hurricane gasoline price increases at the national and regional levels were approximately what would be predicted by the standard supply-and-demand model of a market performing competitively. "
http://www.ftc.go...ces.shtm
ryggesogn2
http://finance.ya...ks?s=xom
Apple: 27%
GE: 9.8%
Osiris1
88HUX88
higher oil prices will encourage this behaviour, and the price isn't going down is it?
ryggesogn2
Depends upon if price is based upon the market or govt taxes and regulations.
tatiana_covington_7
Kah-ching!
krundoloss
ryggesogn2
...that politicians ban the production of to cause artificial scarcity to satisfy a political agenda is dictatorial economics, aka socialism.
Burnerjack
No conspiracy required, they know what you, the collective public can support.
xen_uno
k_m
It appears you may have forgotten one grammar rule your "progressive education" should have taught you: ending a sentence with a prepositional phrase should not be done.
And speaking of the never-ending progressive education for all quest, progressives behave much as a cartel, dictating where and how much an individual's money must go.
Whether it be the great "cap and trade" carbon offset scam or complaints against the "1%", too many progressives have "I know better-than-you" and "big bully" tendencies.
k_m
Correct answer: one manufacturer produces several drill models so varying markets' needs can be met.
Since you bring up drills, Black and Decker traditionally caters to the "home" user and offers products priced accordingly. DeWalt offers tools of higher build quality and more diverse designs and as such professionals and skilled workers purchase those. One "company" manufactures both Black and Decker and DeWalt drills. Many parts interchange; planned usage dictates parts' quality and interoperability. Battery technology, not planned obsolescence is the primary design change cause: NiCd, NiMH, Li ion, etc.
xen_uno
Telekinetic
"Prepositional Phrases - Arranging Prepositional Phrases
grammar.about.com/od/basicsentencegrammar/a/preppharrange.htm However, like adverbs, prepositional phrases that modify verbs can also be found at the very beginning or very end of a sentence.
ryggesogn2
No, the answer is quality.
Quality is meeting the needs of the customer. Should a drill needed by a homeowner once a year be designed the same as one needed every day by a factory?
How 'Planned Obsolescence' any different than entropy? Nothing can last forever.
Telekinetic
ryggesogn2
Never worked in design or manufacture have you?
Ever wonder why a space satellite is so expensive? It MUST be designed to last for years in a hostile environment with no opportunity to be repaired.
So sure, a computer could be made to last for 10 years, but would you be willing to pay for it? Especially after new technology has already made it obsolete?
ryggesogn2
http://www.panaso...ltra.asp
geokstr
Typical ignorant leftist opining on the hated, evil, debbil capitalism without even a clue about the difference between Gross Margin and Net Profit. Ever run a business?
xen_uno
ryggesogn2
That is what the customer's want.
Sounds like most here want to force all companies to manufacture mil-spec products that will cost 10 times what the consumer wants to pay for.
I know I will never buy another cordless drill as the battery technology changes too often.
Telekinetic
As a matter of fact, I've designed AND manufactured a number of products, sold and shipped them nationally, and exhibited them at trade shows, all the while knowing that they could be enjoyed by successive generations.
xen_uno
By the way .. do you call your friend a tard too or are we just special?
ryggesogn2
What are these products?
xen_uno
"In a more modern example, Intel has been repeatedly caught selling high speed CPU's as lower speed CPU's if their yields of high speed CPU's are too high."
Each CPU is tested before packaging with an entire battery of tests, ran at highest designed clock speed. If it fails, frequency is dropped til it passes, and that frequency is stamped on the casing. It's possible that Intel did do as you said to make up for shortages of a particular frequency, but I don't see how selling a high speed one as a lower speed one hurts the consumer. With corporations, anything is possible, and only Intel knows the true story.
So whats next, conspiracy to underclock CPU's to force upgrades? Overclockers can get anywhere from 4-5 GHZ on a 2 GHz and greater CPU if cooled properly ...
xen_uno
"This was in the era when manufacturers actually included a schematic of their product so that it could be repaired"
.. you said his amp came with schematics which SHOULD provide data on the components such as resistance and capacitance. My 35 YO pioneer amp (SA7800) did on its schematic. If you totally smoke a resistor for instance, you won't be able to read the color bands, and that's another function of the schematics, besides physical connections.
CPU's are amortized to cover all the machines required to fab plus engineering, testing, and marketing, etc plus the overhead of multimillion dollar salaries in the front office ... so I don't think it's nearly as cut and dried as you make out, but then again I'm not in their accounting department, and neither are you. Intel didn't have serious competition til AMD became a contender, and ever since then Intel (and AMD) have put out faster, cheaper processors.
xen_uno
"There was no "spec". Output was to some speakers and this was over 40 years ago. There were no "spec" for such things."
You failed on this one, but I won't slander/dork your name as I don't sink to those levels unless provoked.
Job001
cacortez
rocha