[tsimionescu]

It doesn't matter if there are consequences for not following the illegal price fixing scheme (the recommendation algorithm). The fact that they are creating a price fixing scheme in the first place is illegal.

It's the same thing as if I were to call for a meeting of all landlords in my area to discuss rents. Anyone who owns property in the area is invited. At the meeting, I would propose that we all keep rents above 1000$ per room. People would argue and finally there'd be some broad agreement that 900-1100$ dollars per room is a better idea. We don't sign anything and don't imply any repercussions for those who ignore it. Then, 90% of those present would undercut the agreed numbers and offer their rooms for 800$. The end result is that rooms in the area go for 750-900$, so we utterly failed.

What everyone present at that meeting did, even those who undercut the agreed prices, is illegal price fixing. Competitors are simply not allowed to discuss and agree on prices in any way.

If we replace the meeting with a third party offering a recommendation algorithm that everyone independently follows, knowing that others do the same, nothing materially changes. The algorithm need not be binding, and need not be adopted fully, for this to be illegal to do.

[Geisterde]

I find the pernicious belief that prices could be fixed in the market itself more dangerous than the dumbest price fixing scheme of all time. Let it play out, so we can all remember that price fixing doesnt work, and we might actually see some good come from this story.

[tsimionescu]

Price fixing absolutely works for the parties fixing the price, assuming they have a dominant enough position, at least for some significant time. Look at OPEC - do you seriously believe they would be richer if they competed instead of agreeing on prices/supply?

Monopolies can extract massive wealth from a market, they perfectly optimize profit as long as they are not exceedingly incompetent. Price fixing is just a less organized monopoly.

The problem is that they do this at the cost of all other market participants. But markets can't correct for powerful enough monopolies or cartels. Only outside intervention (riots, government intervention, disruption of the whole sector) can dissolve a monopoly. There is no example in history of a monopoly losing its position in a market without this, since they can always just buy out incumbent competitors.

[Geisterde]

Why would you compare landlords to OPEC? One organization has the backing of several militaries, including ours, defending their market position by threat of war. If you try to sidestep them you could end up like iraq.

Price fixing in the market doesnt work, because rival landlords cant call the government to airstrike their competitors when they get undercut.

[tsimionescu]

As long as demand exists for the product, cartel members make more money than regular market actors. Defectors can make even more money, but that behavior is going to either be irrelevant (if the defector is too small to Mather), or it will be punished - not by armies, but by other coercive measures. Bribing to return, denying access to other services, bad mouthing, even vandalism or illegal violence. The advantage of the cartel is too large to be allowed to dissolve.

And again, we don't have to guess. Cartels need to be broken up from the outside, they just don't dissolve naturally. This is basic economics, and a well understood weakness of markets. The idea that monopolies and cartels are too weak to resist in a market is not born out by either economic theory nor history.

[Aunche]

> As long as demand exists for the product, cartel members make more money than regular market actors. Defectors can make even more money

These two are completely contradictory statements. "Regular market actors" are the same as "defectors." Fracking companies, for example would not be able to exist without OPEC driving up the price of oil because it would be too expensive.

[tsimionescu]

Buyers are also market actors. Also, suppliers who haven't been part of the cartel don't have access to their pricing strategy, and so can't profit as much. Defectors know exactly for some time, and can use that information to beat the market and the cartel in the short term.

[chii]

> If you try to sidestep them you could end up like iraq.

iraq invasion has nothing to do with opec. And no opec country has made military moves to enforce the cartel.

And in fact, a lot of opec countries tries to skirt the quotas for personal gain!