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> I don’t think this leads to market collapse You must have read that the Market for Lemons is a type of market failure or collapse. Market failure (in macroec

by caseyy 1y ago

> I don’t think this leads to market collapse You must have read that the Market for Lemons is a type of market failure or collapse. Market failure (in macroeconomics) does not yet mean collapse. It describes a failure to allocate resources in the market such that the overall welfare of the market participants decreases. With this decrease may come a reduction in trade volume. When the trade volume decreases significantly, we call it a market collapse. Usually, some segment of the market that existed ceases to exist (example in a moment). There is a demand for inferior goods and services, and a demand for superior goods. The demand for superior goods generally increases as the buyer becomes wealthier, and the demand for inferior goods generally increases as the buyer becomes less wealthy. In this case, wealthier buyers cannot buy the superior relevant software previously available, even if they create demand for it. Therefore, we would say a market fault has developed as the market could not organize resources to meet this demand. Then, the volume of high-quality software sales drops dramatically. That market segment collapses, so you are describing a market collapse. > There’s probably another name for this You might be thinking about "regression to normal profits" or a "race to the bottom." The Market for Lemons is an adjacent scenario to both, where a collapse develops due to asymmetric information in the seller's favor. One note about macroecon — there's never just one market force or phenomenon affecting any real situation. It's always a mix of some established and obscure theories.

dahart 1y ago
The Wikipedia page for Market for Lemons more or less summarizes it as a condition of defective products caused by information asymmetry, which can lead to adverse selection, which can lead to market collapse. https://en.m.wikipedia.org/wiki/The_Market_for_Lemons https://en.m.wikipedia.org/wiki/The_Market_for_Lemons The Market for Lemons idea seems like it has merit in general but is too strong and too binary to apply broadly, that’s where I was headed with the suggestion for another name. It’s not that people want low quality. Nobody actually wants defective products. People are just price sensitive, and often don’t know what high quality is or how to find it (or how to price it), so obviously market forces will find a balance somewhere. And that balance is extremely likely to be lower on the quality scale than what people who care about high quality prefer. This is why I think you’re right about the software market tolerating low quality; it’s because market forces push everything toward low quality.
- caseyy 1y ago
  By the way, inferior goods are not necessarily poor-quality products, though there is a meaningful correlation, and I based my original comment on it. Still, a OnePlus Android phone is considered an inferior good; an iPhone (or a Samsung Galaxy Android phone) is considered superior. Both are of excellent quality and better than one another in key areas. It's more about how wealth, brand perception, and overall market sentiment affect their demand. OnePlus phones will be in more demand during recessions, and demand for iPhones and Samsung Galaxys will decrease. No objection to your use/non-use of the Market for Lemons label. Just wanted to clarify a possible misconception. P.S. Apologies for editing this comment late. I thought the original version wasn't very concise.
  - nine_k 1y ago
    > A OnePlus Android phone is considered an inferior good; an iPhone (or a Samsung Galaxy Android phone) is considered superior. Both are of excellent quality No, the inferior good is a device with 2GB RAM, a poor quality battery, easy to crack screen, a poor camera. poor RF design and thus less stable connectivity, and poor mechanical assembly. But it has its market segment because it costs like 15% of the cost of an iPhone. Some people just cannot afford the expensive high-quality goods at all. Some people, slightly better-off, sometimes don't see the point to "overpay" because they are used to the bottom-tier functionality and can't imagine how much higher quality may be materially beneficial in comparison. In other words, many people have low expectations, and low resources to match. It is a large market to address once a product-market fit was demonstrated in the high-end segment.
    - caseyy 1y ago
      I mean "inferior good" as a macroeconomics term: https://www.investopedia.com/terms/i/inferior-good.asp https://www.investopedia.com/terms/i/inferior-good.asp. And the point of my comment is to show that product quality alone doesn't determine whether it's an inferior good.
      - nine_k 1y ago

by caseyy 1y ago

dahart 1y ago

The Wikipedia page for Market for Lemons more or less summarizes it as a condition of defective products caused by information asymmetry, which can lead to adverse selection, which can lead to market collapse. https://en.m.wikipedia.org/wiki/The_Market_for_Lemons https://en.m.wikipedia.org/wiki/The_Market_for_Lemons The Market for Lemons idea seems like it has merit in general but is too strong and too binary to apply broadly, that’s where I was headed with the suggestion for another name. It’s not that people want low quality. Nobody actually wants defective products. People are just price sensitive, and often don’t know what high quality is or how to find it (or how to price it), so obviously market forces will find a balance somewhere. And that balance is extremely likely to be lower on the quality scale than what people who care about high quality prefer. This is why I think you’re right about the software market tolerating low quality; it’s because market forces push everything toward low quality.

caseyy 1y ago
By the way, inferior goods are not necessarily poor-quality products, though there is a meaningful correlation, and I based my original comment on it. Still, a OnePlus Android phone is considered an inferior good; an iPhone (or a Samsung Galaxy Android phone) is considered superior. Both are of excellent quality and better than one another in key areas. It's more about how wealth, brand perception, and overall market sentiment affect their demand. OnePlus phones will be in more demand during recessions, and demand for iPhones and Samsung Galaxys will decrease. No objection to your use/non-use of the Market for Lemons label. Just wanted to clarify a possible misconception. P.S. Apologies for editing this comment late. I thought the original version wasn't very concise.
- nine_k 1y ago
  > A OnePlus Android phone is considered an inferior good; an iPhone (or a Samsung Galaxy Android phone) is considered superior. Both are of excellent quality No, the inferior good is a device with 2GB RAM, a poor quality battery, easy to crack screen, a poor camera. poor RF design and thus less stable connectivity, and poor mechanical assembly. But it has its market segment because it costs like 15% of the cost of an iPhone. Some people just cannot afford the expensive high-quality goods at all. Some people, slightly better-off, sometimes don't see the point to "overpay" because they are used to the bottom-tier functionality and can't imagine how much higher quality may be materially beneficial in comparison. In other words, many people have low expectations, and low resources to match. It is a large market to address once a product-market fit was demonstrated in the high-end segment.
  - caseyy 1y ago
    I mean "inferior good" as a macroeconomics term: https://www.investopedia.com/terms/i/inferior-good.asp https://www.investopedia.com/terms/i/inferior-good.asp. And the point of my comment is to show that product quality alone doesn't determine whether it's an inferior good.
    - nine_k 1y ago