Market Limits, Episode 0

No Comments

Operations research depends on limits.
This blog post aims to list some of them. The blog post is subject to modification.

Limit_1: Cost of Transportation

The transportation cost related graph is similar to the graph from the blog post titled "Ideas About Next Generation Weaponry, Episode 0". The transportation cost related graph shows that a weaker player, in this case, a merchant with a higher price, can be the strongest player locally and a whole "war" (market niche) can be won (monopolized) by winning "enough" "battles" locally. If the monopolist is smart, he understands that he has to use the sales volumes that he achieved through monopoly to optimize the operations to the point that no smaller, newer, competitor, can afford to offer lower price. The idea is that new-comers do not have the sales volumes that offer the types of optimizations that are available to the monopolist. The smart monopolist can be beaten by newcomers, who use considerably more effective technology than the smart monopolist has. It is an arms race between "establishments" and "the small guys" and the small guys do have a chance, specially in circumstances, where the "establishments" become too comfortable, like the Nokia did.

The good news for "small guys" is that the "establishments" tend to see the smartest candidates, most creative people, as a PROBLEM, not an opportunity. As of 2014 the Google has become just another big, corporate, "establishment". So, life is awesome, despite the "establishments"! :-D That also holds for politics, where nonprofits can do a better job than the robbing and crushing governments, provided that the "little guys" are smart enough. The fake elections can be ignored in peace. By ignoring elections, the "establishments" are forced to start faking numbers to announce their "mandate".

Limit_2: Marketing Budget (Costs of the Sales work)

The rat image originates from the Wikimedia Commons.

Limit_3: Market Size Irrespective of Price/Costs

The idea here is that if the end price combined with transportation costs were literally zero, the market size is still limited. For example, a cubic meter of rain-water might have a high price in desert, but people, who live next to a lake that is filled with clean water all year long, will not need extra water even if it were for free. Assumption is that the "bottled water" sales is not about water, but about something else, may be about the service of preparing water for consumption.

Comments are closed for this post