MMS Bazaar Notes - Markets and Management Certificate core class, learning about structure and PDF

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Markets and Management Certificate core class, learning about structure and function of markets, as well as fundamental marketing principles....

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Reinventing the Bazaar Notes Chapter 1 ● Dutch flower market: competitive buying and selling ● First cities built trading links and culture developed alongside markets ● Internet = modern bazaars ● What is a market ○ Decision making autonomy, participation is voluntary , but constrained by resources and rules of market ○ Competitive market means alternatives exist ● Market economy even though there are nonmarket transactions ● Trasnaction costs ● Formal vs. informal, top down vs. bottom up ● Market is an “Ordered brawl” Chapter 2 ● Where markets are absent, they can be established to generate mutual gains from trade (ie ebay) ● Creation of stock exchanges around the world Chapter 3 ● Pharmaceutical market entangled with government ● Government in control of public health ● @COVID Chapter 4 ● Search for information is central to the bazaar ○ Overpricing: price stays high due to buyers lack of information ● Search costs and evaluation costs ● Solutions to informational problems: repeat-business relationships (only partial), consumer reports/ yellow pages, WOM, brand names, trademarks, market intermediaries ● Internet did not create entirely frictionless markets because buyers cannot determine quality Chapter 5 ● Marketplace confidence and trust ● Quality: shown through signaling, advertisements, ostentation ● Contractual assurance ● Every transaction relies on trust between buyer and seller Chapter 6

● Bargaining vs. competition: fish market ○ No indeterminacy over price in competition ○ Competition changes balance of bargaining power, and it also lowers transaction costs by getting rid of bargaining tactics ● “Private values”: each buyer attaches different, subjective value to object ● “Common value”: everyone valuing same object/objective, all trying to assess future marketability of object ● “Winners curse” ● “Best-bid method” ● Competitive market made possible in part by existence of lots of firms Chapter 7 ● Ebay has network externality because they were the first of its kind ● Earlier auction sites held by the government ● “Simultaneous ascending auction” used by FCC Chapter 8 ● Def of ownership ○ Ownership is the strongest source of incentives ○ Also ownership by contracts ● Research by start-up firms can be beneficial ● Chinese communes Chapter 9 ● Intellectual property protections ● Patents, copyrights, trademarks ● Electronic commerce→ business methods could be patented ● Silicon Valley workers more likely to share ideas bc culture of mobility as well as laws forbidding companies from forcing employees to not work for competing firms ● Buyout mechanisms by gov Chapter 10 ● Externalities ● Taxation and regulation are top-down externality solutions ● Fishery x property rights: cant control who owns ocean ● Catch quotas tackle overfishing externalities ● Coordination necessary in professional sports ○ Revenue sharing among teams Chapter 11

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Tension between state and markets More corruption = less growth and less investment Corruption does less harm when it is monopolized than free for all Dango ○ Production costs are inefficiently high bc: ■ Competitive bidding ■ Firms sidestep the discipline of competition ■ Colluding firms must deter entry by inefficient newcomers or entry costs will be high

Chapter 12 ● Failures of central planning in communist Europe and China ● Role of state in the economy: gov empowers people to find creative solutions to problems, and the state is indispensable in elaborate exchanges occurring in modern economies bc they provide goods and services that markets would undersupply and serve as the underlying rule setter ● Waste resulted from centrally-planned economies ○ Lack of information is inherent in centrally planned economies ● Adam Smith invisible hand ● Internet similar to decentralized market economy ● Public goods ● Shadow economy, able to thrive even if government is negligent or disruptive ○ Avoid taxes/bureaucracy but also help from the gov ● Where should the scope of markets end? Chapter 13 ● Planned economies work in Walmart and GM, but not in communist countries-- why? ○ Firms owners have a direct stake in the success of the firm ● Firms exist as a response to market frictions, that is why not every worker exists as their own entity but rather as an employee of a firm ● Private ownership is the reason why most firms are successful and run efficiently ● Adam Smith: organization managers are in control of other peoples money more so than their own so they dont treat it as well ● Market forces are checks and balances for separation of ownership and control ● US regulatory structure: emphasis on accurate disclosure Chapter 14 ● Tradable pollution licenses from government → firms ● Gov also tried to take control of the electricity market in California but turned our worse

○ Didnt work bc it didn't meet a requisite of market design: prices should reflect production costs Chapter 15 ● Designing an entire economy is different than designing one market ● New zealand: test case for shock therapy from highly regulated to not regulated ○ Little innovation at first ○ No growth directly after change, radical change was hard ● Main argument against shock therapy: it hinders the development of needed economic and political institutions ● Russia also tried shock therapy to privatize their economy ○ Bad outcome, living standards and wages down] ○ Shock therapy shattered the relationships among firms ● China: rapid and immediate economic growth ○ “Virtually painless reform” ○ Also kept a lid on inflation, which russia did not do ○ China fostered the creation of new firms rather than immediate privatization Chapter 16 ● Protests of WTO/globalization made “economics exciting” ● Do you believe there is a future for globalization? Is it possible for global superpowers to continue to spread their influence and make money, or will there hit a breaking point where there is too much tension to continue expanding? Who will come out on top, and who will lose? ● Are the worlds poor victims of globalization? ● Solution is economic growth and spreading of resources ● Measure in poverty and inequality ○ Inequality generate unrest and political instability, preventing growth ● Health is a measure of standard of living ● Investment is a direct route to growth ● Education spurs growth ● Is there any way to erase poverty without globalization? ● It is a myth that markets do away with poverty Chapter 17 ● Ayn Rand, Ellen Meiksins Wood ● Rand’s ideal world is “complete separation of market and economy”. McMillan writes this off as completely infeasible, but you can think of a way that this could lead to a successful society?

● Mcmillan concludes his book by claiming that you can assume how one feels about our free-market economy simply by knowing their political affiliation. Do you think that the increasing political polarization we are experiencing in the UNited States will ultimately have an impact on our economy? Has it already? How can you see polarization hindering our economy? ● A functioning market is all about trust ● A market only works well if it is well designed ● A market is like a democracy: it admits variety and permits criticism...