[adminu]

> Then, there is a switch to the most traditional of businesses with the most traditional business models. Who, the author argues, are engaging in price gauging. In the second paragraph he claims that apps cause this inflation

He is saying that the traditional businesses use an app that allows for a legal way of price gauging.

> The last paragraph portraits a stunning lack of economic knowledge, as companies raising prices in line with inflation obviously would not lower prices after the source of the inflation is gone.

The author claims, that these companies raise prices more than inflation based cost increases in production would allow for.

[gruez]

>The author claims, that these companies raise prices more than inflation based cost increases in production would allow for.

That's just supply and demand? People get mad that when there's an oil shortage, that oil companies raise prices above the cost of production, but they're happy to see oil companies' margin collapse when there's an oil glut.

[amluto]

What supply and demand? The supplies of these goods have had occasional disruptions but are largely unchanged. The demand has not changed in any material way. And yet the prices have increased, and those increases have far outstripped the increases in the cost of goods sold.

It’s worth noting that, in classical economic theory, the price in a competitive market is set by matching supply and demand, but the price in a monopolistic market is set higher such that the profit (“producer surplus”) is maximized, which harms the buyers (“consumer surplus”) even more than the amount by which the seller benefits. The net loss is called deadweight loss, and one can argue about whether and how government policy should be arranged to minimize deadweight loss.

[DasCorCor]

They’re colluding to fix prices. That is a cartel. It is facilitated by a middleman app. Still unethical, and should be illegal.

[danny_codes]

The author’s entire thesis is that there isn’t a market for lots of goods because of oligopolies colluding. Supply and demand don’t work like the textbook says they will if there’s no market. He’s saying that almost all potatoes are sold by a couple firms, and those firms collude on price, effectively meaning (from a pricing perspective) that there is only one potato company. They therefore can charge whatever they want, up to the point of driving their customers out of business.

This is in contrast to a healthy market, in which producers compete by lowering prices to the point where the producer would go out of business.

[Pooge]

> People get mad that when there's an oil shortage, that oil companies raise prices above the cost of production

It's a bit different when they all (i.e. cartel) agree to keep the same price even after the shock has passed, isn't it?

[scott_w]

The article is very clear in the mechanism: he posits companies are “blindly” colluding by using third party price information to inform their decisions on their own pricing. This isn’t “collusion” because they’re not the picking up the phone to each other to discuss price fixing. They’re allowing a third party to tell them what others are charging and “coincidentally” decide that they’d like to charge that, too.

If this fits the legal definition of a cartel and price fixing, I can’t say. I’m not a lawyer nor do I know what US law says on this matter. However, it’s fair to say there’s a bad smell to the whole affair.

[mrunkel]

No, the article says that the suppliers send data to a central service, which then tells them the optimal price, this service bases this price based on data sent by all other suppliers, and presumably gives all suppliers the same price.

[itsoktocry]

True market clearing prices depend on easy entrance and exit of participants in the market. Apparently that isn't the case with potatoes, per the article.