Markets v. Queuing
Popular sentiment often accuses market processes as being 'unfair.' What happens, however, when a more 'fair' allocation institution is chosen? Munger mentions that "queue-based allocations often evoke secondary, or "black," markets, where allocations initially dictated by queueing are reallocated by prices."
This Christmas season the nintendo wii was exceptionally scarce. Some retailers bundled the wii with games and doubled or tripled the price. Most retailers, however, relied on queuing to distribute what they had in stock. Opportunity cost of owning the wii was higher than the value gained by playing it for most, and an extensive secondary market emerged. It seems that we do not have the ability to prevent barter and trade between people.
Furthermore, the equity consideration is also fallacious. While market allocation is biased towards those with money, queuing is biased to those people with time. How can we say one bias is better than the other without descending into the realm of normativism.
This Christmas season the nintendo wii was exceptionally scarce. Some retailers bundled the wii with games and doubled or tripled the price. Most retailers, however, relied on queuing to distribute what they had in stock. Opportunity cost of owning the wii was higher than the value gained by playing it for most, and an extensive secondary market emerged. It seems that we do not have the ability to prevent barter and trade between people.
Furthermore, the equity consideration is also fallacious. While market allocation is biased towards those with money, queuing is biased to those people with time. How can we say one bias is better than the other without descending into the realm of normativism.
posted by bob_fawson at 2:15 PM
2 Comments:
It is interesting to note that the problem described by Munger is the probable outcome that is described by many game theorists. Essentially in order to reach the desired result a deviation from the formal rules is arranged and a quasi market develops to provide the most desired outcome.
As well the Queuing allocation is actually analogous to nearly any governmental intervention in the market place. In essence whether creating a set of rules for Queuing an outside force is attempting to manipulate the outcome of the transaction. In this case it is trading one commodity for another in this case time becomes the commodity that allows a preferred outcome to occur.
(I apologize if this is muttled, I'm writing from a tiny screen while riding in a car.)
Sorry one line makes no sense now that I read it. it should read
...rules for queuing or regulating industry, an outside force is attempting to manipulate the outcome of the transaction....
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