If a market lacks friction, there’s no money to be made
by drm on August 12, 2009
Here’s a really interesting post on the impact of markets that are too transparent and frictionless. The opportunities for intermediaries — read media companies — become more limited when there less opacity. Perfect information mean minimal profits, in this theory.
| To mathematically link the two levels of analysis, Chatain and Zemsky set a value for what they call “frictions.” The word describes any forces that make it difficult for buyers and sellers to connect. For example, a poor location could be a source of friction for a retailer, because customers will have to go out of their way to visit the store. A poorly designed web site could create friction for an online business if potential customers are unable to find what they are looking for easily. |
But what is really interesting* is the outcome of this work, ie that too little friction destroys value as effectively as too much:
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