[arin-ppml] Will the price per IP really be affected bythetransfer market introduced in 2009-1?

[Stephen Sprunk]

Kevin Kargel wrote:
>> -----Original Message-----
>> From: Stephen Sprunk [mailto:stephen at sprunk.org]
>> Sent: Friday, May 15, 2009 10:54 AM
>> To: Kevin Kargel; ARIN PPML
>> Subject: Re: [arin-ppml] Will the price per IP really be affected
>> bythetransfer market introduced in 2009-1?
>>
>> Kevin Kargel wrote:
>>     
>>>> And it also turns out that agreeing ahead of time how we'll all set pricing is against the law.
>>>>         
>>> Yep, and that's why every gas station in town changes their price at the same hour of the same day to the same tenth of a cent.  But wait, that would be against the law..
>>>       
>> Price matching is legal; what is illegal is colluding in advance to set prices at a particular level.
>>
>> In many states, it is illegal for gas stations to change their prices more than once per day.  So, what happens is that each morning in any given locale (here, it's at each major intersection where there will be 2-4 gas stations on the corners) one manager will go out and put up his price for the day, and the other manager(s) will immediately respond by setting their price the same or one cent less.  That is perfectly legal; it may _look_ like collusion to an uninformed observer, but it isn't collusion if they don't meet ahead of time to discuss what they're going to do, only respond to each others' public actions.
>>     
>
> Ah, but if you watch they all change their prices at the same time.

It's not at _exactly_ the same time.  Even a few minutes is enough for 
one manager to see what the other manager has done and respond accordingly.

> How does that happen if they don't discuss it "ahead of time".

Manager A knows that manager B puts up his price at a particular time, 
so he looks over at that time, watches what price goes up, and walks out 
to put up his own new price (either the same or a penny less).

> I find it hard to believe that at 2AM there are 200 managers driving around town to check 200 gas stations so they can set their prices.  The price changes don't ripple out, they toggle at the same time.
>   

I seriously doubt that all 200 gas stations in your town have exactly 
the same price every single day.  However, they're all getting similar 
pricing information from their upstream suppliers, so it's not 
surprising that they tend to move in tandem most of the time.

Here, there are thousands of gas stations, but each intersection appears 
to operate as a mostly-independent market; one manager puts up his 
price, and the others change theirs a few minutes later.  What happens 
at one intersection is only very loosely correlated with other 
intersections, but that's undoubtedly an effect of having 2-4 gas 
stations at each intersection, as opposed to having them distributed 
evenly all over town where it'd be much harder to determine who's 
responding to whom.

> Besides, if everyone picks one station to set the standard and they all
> agree "ahead of time" to match that station, isn't that the same collusion?
>   

That would be collusion, but that isn't what they're doing.  Each 
manager makes an independent decision to match or undercut the other 
stations, and who makes the first move each day usually varies in 
practice.  However, even if it's always the same guy who moves first, as 
long as the various managers haven't _met_ ahead of time and _agreed_ to 
match his price, it's still legal.  That might be a frequent result, but 
absent a meeting and an agreement, it's not price-fixing.

This is why proving price-fixing cases is so difficult: rational 
independent behavior looks pretty much the same as collusion in a highly 
competitive, commodity market.  What matters is whether the behavior is 
independent, not whether it happens to be uniform, and to disprove 
independence, you have to prove a meeting was held and an agreement was 
made.

Getting back on topic, if we all agreed that we'd raise our rates $1/mo 
to cover the cost of buying IPv4 addresses on the market, that'd be 
illegal.  However, if one provider is forced to raise their rates $1/mo, 
and the next day all the others decide that means they can raise their 
rate as well, that's legal.

S

-- 
Stephen Sprunk         "God does not play dice."  --Albert Einstein
CCIE #3723         "God is an inveterate gambler, and He throws the
K5SSS        dice at every possible opportunity." --Stephen Hawking

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