The world's funniest economics stories

Chapter 32 Good business depends not on collisions but on skills (2)
Introducing the [devotion] period.When a new product enters the market, it enters the introduction period.At this time, customers do not know the product yet, only a few customers who pursue novelty may buy it, and the sales volume is very low.In order to expand sales, a large amount of promotional expenses are required to promote the product.At this stage, due to technical reasons, the products cannot be produced in large quantities, so the cost is high and the sales growth is slow. Instead of making profits, the company may lose money.The product also needs to be further improved.

growing period.At this time, customers are already familiar with the product, a large number of new customers start to buy, and the market gradually expands.The products are mass-produced, and the production cost is relatively low. The sales of the enterprise increase rapidly, and the profit also increases rapidly.Competitors will enter the market one after another to participate in the competition when they see a profit, which will increase the supply of similar products, and the price will drop accordingly. The growth rate of corporate profits will gradually slow down, and finally reach the highest point of life cycle profits.

Maturity period.The market demand tends to be saturated, there are few potential customers, and the sales growth is slow until it turns to decline, which indicates that the product has entered a mature period.At this stage, competition gradually intensifies, product prices decrease, promotion costs increase, and corporate profits decrease.

Recession.With the development of science and technology, the emergence of new products or new substitutes will change the consumption habits of customers and switch to other products, so that the sales and profits of the original products will drop rapidly.As a result, the product has entered a period of decline.

4. The Danger of "Minority Obedience to Majority" - Arrow's Impossibility Theorem

Although the education laws of each country are different, most of them stipulate that people over the age of 16 have the right to enjoy education. For example, in our country, there is a compulsory education law, which stipulates that citizens have the right to receive compulsory education. , and will be sanctioned if violated.

But in the United States, there is a strange nation—the Amish. They believe that youths over the age of 15 must leave school and work in agriculture.Because a large number of Amish youths over the age of 15 left the school, the police believed that they had violated the law, so they forced the Amish youths to enter the school for education, but most of the Amish were unwilling, so they broke out A head-on confrontation between the police and the Amish people broke out.

The Amish felt that the law had violated the rights of their nation, so they took the matter to court.Originally, this was a matter that could not be resolved at all, because the Amish people openly opposed the laws of this country, but the judge at the time made a correct decision, that is, to protect the Amish people's "right not to be educated". ".The judgment held that the interests of the entire people do not exist and cannot override the religious freedom of the minority. The Amish people's "right not to be educated" did not harm the society, and there was no reason to prove that Amish people with this unique way of life The wrong people are wrong.This long-running lawsuit embodies a spirit that "respects the majority while protecting the minority, and does not require the minority to obey the majority absolutely." democratic principles.

The principle of "the minority obeys the majority" has been followed by everyone, but this principle does not apply to everything.Especially in business management, some special situations will be encountered.Therefore, sometimes the principle of "the majority obeys the minority" is also a manifestation of wisdom.Speaking of this, we found that there is a theorem hidden in it - Arrow's impossibility theorem.

Arrow's impossibility theorem means that if many members of society have different preferences, and the society has multiple alternatives, it is impossible to obtain a result that satisfies all people in a democratic system.The theorem was proposed by Kenneth J. Arrow, an American economist who won the Nobel Prize in Economics in 1972.

Arrow's impossibility theorem shows that it is impossible to choose a consistent order among various personal preferences by relying on the voting principle of simple majority.In this way, a reasonable public product decision can only come from a competent public authority, and it is generally impossible to achieve a coordinated collective choice result through the voting process.

The short story above is a good illustration of Arrow's impossibility theorem. The judge in the story did not follow the opinion of the majority, because the opinion of the majority cannot be approved by the society, and the choice of the Amish There is no harm either, and democracy cannot be lost in order to obey the wishes of the majority.Therefore, the judge's "majority obeys the minority" approach is very wise.

The problem involved in Arrow's impossibility theorem is very representative.Arrow explained that adopting the decision rule of so-called majority voting will inevitably lead to dictatorship.We usually think of majority voting as the deciding principle that enables democracy, but in reality it does not.As far as democratic societies are concerned, Arrow's so-called voting results based on the principle of majority expression can sometimes lead to paradoxical effects of voting, and his point of view is of great significance.Arrow believes that the paradox of voting does not happen often, but has a certain degree of chance.If this probability is so small, then the significance of Arrow's impossibility theorem will be overshadowed.

Voting paradox refers to the obstacles or intransitivity encountered in the process of realizing the transformation from individual choice to collective choice through the "majority principle", which is a difficult problem derived from Arrow's impossibility theorem.Public choice theory studies voting behavior, assuming that voting is performed by those whose welfare is affected by the voting results, and the role of voting behavior is to transform individual preferences into social preferences.Under the principle of majority voting, there may not be stable and consistent results.

5. Microsoft Monopoly and Antitrust Policy -- Monopoly and Antitrust Law

On June 2010, 6, the Federal Court of Appeals for the District of Columbia made a ruling, rejecting the judgment made by Judge Jackson of the District Court in June 28 to split Microsoft into two parts, but upheld the anti-competitive business practices that Microsoft engaged in in violation of antitrust laws. conduct judgment.The appeals court asked the district court to appoint a new judge to reopen the historic antitrust case.

It should be emphasized that in the United States, it is not necessarily illegal for a company to have a monopoly position or attempt to obtain a monopoly position, but it is illegal to maintain or obtain a monopoly position through "improper conduct."The U.S. Department of Justice accused Microsoft of "engaging in unfair anti-competitive conduct."

Counting from 1990 when the Federal Trade Commission began to investigate allegations of Microsoft's market monopoly, the US government's anti-monopoly actions against Microsoft have lasted for more than 10 years, during which time the White House changed hands.Jackson ruled in late 1997 to bar Microsoft from bundling its web browser with Windows, but an appeals court overturned Jackson's ruling the following May, according to the Justice Department's allegations.As a result, the Ministry of Justice dragged Microsoft to the dock again in May 5. This time Microsoft was almost split into two companies.

Compared with some major antitrust cases in the history of the United States, the Microsoft case has remarkable characteristics.First, Microsoft is basically a self-developed monopoly.Mobil Oil Company and AT&T Company, which were spun off in 1911 and 1984 respectively, became the "big macs" of their respective industries by annexing their competitors.Second, Microsoft's development is based on intellectual property and knowledge innovation.Thirdly, although Microsoft has an absolute monopoly on the PC operating system market, it did not take advantage of this monopoly to raise prices unreasonably. Its web browser was given away for free at the beginning.

In addition, this is the most representative anti-monopoly case since the United States entered the new economic era, and its outcome is likely to become a precedent for anti-monopoly cases in the high-tech field in the future.

In response to such a landmark case, the US Department of Justice played the banner of "promoting innovation".On the eve of Jackson's decision to split Microsoft, then-Attorney General Reynolds had said that the antitrust action against Microsoft was to create a competitive environment that would increase consumer choice.This view is supported by many antitrust experts.

Robert Litan, an expert on antitrust issues at the Brookings Institution of the United States, believes that in most industries in the United States, innovation is the most important driving force. Therefore, the Microsoft case must have the value of setting a precedent.Paul Romer, a well-known American economist and founder of the "New Growth Theory", also supports anti-monopoly actions against Microsoft.He believes that innovation is the most important factor in determining consumer welfare, and that competition is more likely to bring about innovation than monopoly.

A monopoly generally refers to a sole seller facing competing consumers in one or more markets through one or more stages.This is the exact opposite of monopoly.A monopolist can adjust price and output at will [not at the same time] in the market.The original meaning of monopoly is monopoly, that is, there is only one operator in a market.

Anti-monopoly law, as the name suggests, is a legal system that opposes monopoly and protects competition.It is the basic legal system of market economy countries.Also known as antitrust law.

Like competitive firms, the goal of a monopoly firm is to maximize profits.The market results brought about by monopoly are often not the best from the perspective of social interests.Therefore, the government can improve this unfavorable market outcome through administrative means.Microsoft's lawsuit can prove it.

In fact, the U.S. government’s focus on promoting innovation as an antitrust policy is not only reflected in the Microsoft case.A few years ago, the Justice Department rejected Lockheed Martin's merger with Northrop Grumman on the grounds that a combination of the two arms companies would hinder innovation in critical U.S. defense technology.

It can be said that whether the vitality of innovation can be maintained is the key to whether the US economy can continue to lead the world. Therefore, it is not surprising that the focus of US anti-monopoly policy has gradually shifted from maintaining price competition to promoting innovation.

For an enterprise, it is not illegal to have a high market share, and it constitutes a monopoly only when the enterprise uses its dominant position in the market to set up barriers to prevent other competitors from entering, or to conduct unequal competition in other ways or means, such as bundled sales. Behavior.

The monopoly advantage theory, in 1960, American scholar Stephen Heimer completed his doctoral dissertation "Internationalization of Domestic Enterprises: A Study of Foreign Direct Investment" at the Massachusetts Institute of Technology, took the lead in challenging the traditional theory, and first proposed the monopoly advantage theory.After that, C.P. Kindelberger of the Massachusetts Institute of Technology supplemented and developed the theory of monopoly advantage on the basis of Haimer.It is a theory that clarifies that contemporary multinational corporations have monopoly advantages in overseas investment.

This theory holds that the investigation of foreign direct investment should focus on "monopoly advantage".The theory is sometimes referred to as the "Heimer-Kindleberger tradition" in view of the significant contributions made by both Highmer and Kindleberger.

6. Philip Zimbardo's Experiment - Broken Window Effect
A corner of the door and window of a thriving barber shop was broken.Because he was busy, the boss hadn't had time to fix it yet.One night, a little boy passed by here and saw the window with a broken corner. He felt itchy for a moment, so he picked up a stone and threw it at it.At this moment, most of the glass fell down with a splash.The little boy just happened to disappear around the corner of the street just as the store owner was walking to the door.Although he knew that it was necessary to repair the broken windows, but because he was still very busy, the boss still ignored most of the broken windows.

A few days later, the little boy passed by the door of the barber shop again. Seeing that the broken window was still there, the little boy picked up the stone and smashed it again.This time, the remaining half of the window was shattered.When the angry boss heard the sound of glass being broken and ran to the door, the little boy had long since disappeared.

As a last resort, the boss had to replace the new windows.After that, in order to prevent the little boy from breaking the glass again, the shop owner quietly guarded the door of the shop for many nights, but he never saw the little boy who broke the glass again.After the glass windows were repaired, no one came to throw stones at the windows anymore.

(End of this chapter)