Can predictions create their own reality?

The owner of a chain of toy shops has warned the Observer that demand for popular toys may outstrip supply this year. Thus parents who leave important purchases until shortly before Christmas may experience frustration and/or higher prices.

While there may be valid reasons why this year may be more difficult than usual, thus justifying the coverage that this warning has been granted in many other news channels, both in the UK and the USA, it is also worth noting that the sources quoted by the Observer (described as "seasoned figures in the toy industry") are not exactly disinterested observers, and clearly stand to benefit from the early purchasing behaviour that this warning is intended to stimulate.

The point I want to make here is that warnings of shortages can often result in the very shortages they are warning about, and this effect may not always be unintended.

But we have also seen the opposite effect. When "seasoned figures" announce that supply is robust and there is no danger of shortages, people often buy extra anyway, just in case the announcement is false. The paradox here is that under certain conditions two opposite statements may produce the same outcome. I mentioned this paradox in a talk I gave at a philosophy seminar over thirty years ago.

 

---

 

Louis Ashworth, Parents told to buy Christmas toys early to beat shortages (Telegraph 29 July 2021)

Michael Savage, Toys could be in short supply this Christmas, so get buying now, industry warns (Observer via Guardian website, 15 August 2021)

Joan Verdon, Shipping Container Crisis Could Derail Holiday Toy Sales (Forbes, 3 August 2021)

Richard Veryard, Speculation and Information: The Epistemology of Stock Market Fluctuations (Invited presentation, King's College London, 16 November 1988). Warning - the theory needs a complete overhaul, but the examples are interesting.

Related posts: Trolls are like ghosts (December 2020), On the performativity of data (August 2021)

Dairy Prices

British supermarket Sainsbury's has been fined £26m for dairy price fixing. Chief executive Justin King told the BBC that its price initiatives in 2002 and 2003 "were designed to help British dairy farmers at a time of considerable economic pressure and public debate about whether farmers were getting a fair price for their products". [BBC News December 7th 2007]

But the Office of Fair Trading found no evidence that farmers had benefited. And the National Farmers Union worries that the fines "could take money out of the supply chain". In other words, the supermarkets will wish to pass the costs of this regulation back onto the farmers.

Supermarkets typically claim to represent the interests of consumers or suppliers, but we may have reason to be sceptical of these claims. See earlier post: Wal-de-Mart and the profit eaters.

Wal-de-Mart and the Profit Eaters

Following my earlier post on Lost Profits, a row has blown up between Asda (part of Wal-Mart) and Bloomsbury (publisher of some obscure children's book).

Potter publisher halts Asda order, BBC News July 17th 2007

The facts are (not surprisingly) disputed. But there is a suggestion that Asda has failed to pay in full for previous Harry Potter books. I don't know what has happened in this case, but supermarkets often apply retrospective discounts to their suppliers - paying less than the agreed price.

Supermarkets typically defend their price-cutting stance, and their aggression towards suppliers, by claiming that they represent the interests of consumers. In this case, Asda is claiming that the Harry Potter book is too expensive for children. Obviously Asda wants to make sure the children have some pocket money left for sweets as well.

It seems a bit late in the day for Bloomsbury to take a principled stance against commercial bullying by a large retailer, if that's what's happening. Or for that matter for Asda/Wal-Mart to complain about a publisher profiting from a blockbuster. Presumably some last-minute deal will be struck. But if Asda allegedly doesn't pay its bills BEFORE it's got its hands on the last Harry Potter book, it's hardly going to pay its bills AFTERWARDS. Can anyone trust Wal-de-Mart?

Business Organization Management: Retail

Lost Profits

What is the point of selling Harry Potter cheap? What is the point of giving away free copies of Prince's latest album?

• Potter magic fails to rub off on retailers (June 20th 2007)
• Cheap Harry Potters hit Ottakar's (June 21st 2007)
• Anger at Prince free CD giveaway (June 30th 2007)

The traditional economic structure of the media industry - including books, films and recorded music - is that the risk of supporting unknown and struggling creative talent is compensated by huge profits from a small number of blockbusters. A similar equation applies to the viability of specialist retailers (such as independent booksellers). It is hard to avoid the conclusion that massive discounting of selected items represents a deliberate price war by the larger retailers against the smaller independent ones, with the intent of driving them out of business.

But why do the publishers go along with these tactics? Why do they succumb to discounting pressure from general-purpose retailers? Surely J.K. Rowling and her publishers would make just as much money, perhaps more, by selling a smaller number of volumes at the full price? There are certainly large numbers of Harry Potter fans who would prefer to pay the full price rather than wait for a cheaper edition, if that was the choice available. Perhaps it's because everyone is focused on achieving impressive sales volumes, rather than thinking more intelligently about objectives and targets.

WYMIWYG - what you measure is what you get.