Monday, December 12, 2005

Trust busting is hard work

The Economists's Economic Focus column ("Matchmakers and trustbusters") comments on two recent articles (by Jean-Charles Rochet and Jean Tirole and by David Evans) that analyze two-sided markets. Many businesses depend on concurrent success in two markets. The article cites credit card companies (enough vendors and enough customers must use them) operating systems producers (users and software writers must both flock to them) singles bars (males and females must both show up). To make it all click, suppliers are prompted to discover pricing schemes that do the job. Fine as far as that goes.

But what will the trust-busters and other regulators say (and do)? Free drinks to the ladies? Looks like pricing below cost and grounds for prosecution.

It is again clear that trust-busting is a fool's errand. Absent legalized market closure, there will be competition and innovation and discovery, etc.

BTW, the same issue of The Economist includes "Bats and balls" re scientific work on the (lower) mammals that finds that the sizes or brains and testes are inversely related. Why do we care? Because the research was conducted by males -- and should be cited when we hear that science is just another arena in which males oppress females.