http://whereisbarney.com/tabloid_nuke_tour/cheap_gas_1.jpg

Of course, ABMs give politicians cover to do what they already want to do, so I think you’ll see ABMs used more and more as “evidence” to pass this bill or that. And when an ABM comes along claiming to show something that makes sense to you, be careful! Don’t fall into the trap of using that as evidence to support your world view. It is using fabricated evidence and no good scientist should ever rely upon that.

From supermarket to supermarket, unless a sale is going on, wonderbread will be priced pretty much at the same level. If you buy it at a convenience store, you pay a bit more for the ‘convenience’.

Does this imply that there is a whitebread cartel? Perhaps the most evil, yet bland, cartel in the world?

Of course, the price convergence thus emerging will only remain until until some entrepreneur comes up with a better or more cost-effective mousetrap. then all the existing suppliers must either adapt to th enew technology, or get out of th ebusiness and make something else.

[edit: typo]

Yes, in this scenario they can raise the price for ever, or up to a point when buyers are no longer willing to pay more, or in any case as high as a single seller could. Monopoly! Of course, in practice every company has a monopoly on its products, but there are always substitutes. Apple has a monopoly on iPads, but people can buy cheaper Android tablets. Nothing new.

Propaganda at its finest!

“Negative” outcomes for whom? I don’t even agree with the researchers’ characterisation of this as a “cartel” when there is no specific intent to collude. It is simply a market outcome. I like how they think regulation is in order. No, it isn’t.

If you set your price higher than anyone else, you’re price gouging;
If you set your price lower than everyone else, you’re predatory pricing;
If you set your price the same as everyone else, you’re colluding.

Second (and most pertinent to this study) is the issue of blaming price increases on nefarious collusion amongst sellers. It is widely believed among supporters of anti-trust regulation that without the “wise hand” of government forcibly preventing collusion (or even the appearance of it), such conspiracy would always happen – and price increases in certain industries (like fuel in this example) are often blamed on rich sellers colluding to “artificially” fix prices.

The assumption is that such price increases simply wouldn’t happen if regulators could stamp out all collusion, thus justifying the ever-growing reach of regulatory intrusion in the marketplace (like past attempts to prohibit alcohol consumption).

What this research demonstrates is that the fluctuations often solely attributed to cartel-pricing-schemes can actually have completely organic sources – in other words, none of the agents in the marketplace have to act nefariously in order for such price increases to occur. They are a natural result of the cumulative actions of millions of agents all reacting to each other.

I already believe that the free exchanges of individuals should never be interfered with. I never believed that price increases (inconvenient for some, beneficial for others) were ever cause for intervention. Yet those who favor such action have always claimed that without intervention we would all be drowning in criminal price collusion.

This research demonstrates that even in a model where all collusion has been eliminated, severe price fluctuations can still occur. Thus ascribing such market behavior to “immoral” or “evil” intentions (as a justification for laws against such market behavior) is nothing more than speculation.