Comment by stickfigure
3 hours ago
This was addressed by Matt Levine in today's Money Stuff. The problem was not the presence or lack of competition, it was a technical failure of the market structure. Matt:
This is a familiar story and you probably know the ending. There’s a big market (egg producers selling eggs to supermarkets etc.), and there’s a small market (egg producers selling extra eggs to each other on an electronic exchange). The price in the small market determines the price in the big market. Participants in the small market are also participants in the big market. You can spend a little money in the small market to move the price, which can make you a lot of money in the big market.
Not defending the bad actors here, but there's that whole "show me the incentives and I will predict the outcome" thing. If the market structure rewards manipulation, you get manipulation. The market structure doesn't have to be this way.
> "show me the incentives and I will predict the outcome" thing
There are supposed to be two stopgaps here.
First, the fear of going to jail for committing crimes. Secondly, the social reprisal for committing crimes that hurt people.
Like seriously these CEOs shouldn't be welcome at anyone's table or gathering in polite society as a result of their actions, bare minimum. The government should also put them in prison.
While Matt is technically correct, it's much easier to maintain a conspiracy like this when you have a small number of participants with a high concentration of share.
If power is more diluted among a greater number of participants you are way more likely to see defectors, which would provide accurate pricing data to the market and cause the conspiracy to fail.
Can that be reduced to Prisoners Dilemma game theory?
Yes. Specifically in this case, "defect" is the good case and cooperate is price fixing cartel. So with more prisoners, the chances of someone choosing defect goes up. So then everyone else choose defect, breaking up the price fixing cartel, leading to market forces working and lower prices for consumers.
Or even better, folks actively trying to screw the market manipulators.