Bidding wars don't "solve the drive shortage"; making more drives solves the shortage. This just enables the suppliers to maximise their profits.
At CES Seagate boss Steve Luczo said the company was considering running open market auctions of its disk drives to gauge spot prices and demand. Luczo was talking at an informal investor event attended by Stifel Nicolaus' Aaron Rakers, who wrote that Seagate could run the auction events itself or hire a third party to do it. …
re: Bidding wars don't "solve the drive shortage"
Actually they do - they convert an availability problem into a cost problem, something the market is better able to deal with.
They "solve" the supply problem by reducing demand ... Economics 101. If potatoes were one penny per pound you wouldn't be able to supply all those who wanted them. If you increased the price ten thousand fold you'd suddenly find you had potatoes you couldn't sell. Again, Economics 101 which few IT people seem to grasp. That and balancing your checkbook.
I understand economics perfectly well, and I am also in IT, but I dont know how to balance what ever that checkbook thing is. One book I do know how to balance is a cheque book.
but if potatoes were £100 per pound, people would starve.
if they were £50 per pauond , youd sell them all , and half the people would starve, thereby indicating a supply problem
Economics also says that as demand goes up, supply goes down. As demand goes up, price also increases. So, if there is shortage, that means the price is too low as demand outstrips supply. So by raising the price, the demand will go down and an equilibrium can be met. No need to hold an auction at all.
I'm so glad Doug has explained clearly in terms of potatoes. I now understand that if I were an economist I would realise there was no shortage during the Irish potato famine, since prices rose to a point where demand equalled supply. Those who had food to sell and raised their prices weren't maximising profits, they were dealing with the shortage of supplies... This is why it's such bad news when economists try running the economy. (I'm not necessarily saying anyone else would make a better job of it mind you)
Shirley he meant...
> the company was considering running open market auctions of its disk drives to *gouge* spot prices and demand
He's serious... and don't call him Shirley.
That is all
What's wrong with an Auction? You pay what you want to, if someone else wants to pay more, then you lose out. Isn't that a prime example of the free market?
For me, what's wrong is when I agree to supply you with a product at £50 a pop and my competitor supplies you with his product at £45 a pop. Then suddenly, because he can no longer produce his product, I dump you and our agreement and sell the same product that still costs me the same to make, to the person who pays me the most. There are fairer ways to ration than by price.
I saw a garage do this with petrol prices in north wales during the disputes, and he is now out of business as people remembered when they were fleeced by the guy and bought from his competitors when they had supplies.
It depends on who is running the auction. Take Quibids as an example. They are the seller as well as the auction company; do you see a conflict of interest there? The higher the bid, the more they make.
Take how most auctions work, you can "secretly" provide the maximum that you are willing to pay but the bidding process still works as it would normally. Now if the auction company knows what your maximum bis is, but if the auction company is also the seller, what keeps them from driving the price up to or close to your maximum bid near the end of auction? So while you paid what you want, you paid more than what the market would dictate. In many cases in an auction setting for something you need, you end up paying more. Many times if you could wait a few more days or a few more weeks, you could just bid for the same item on a different auction. If you need it sooner, then you are likely to bid higher. Example, you car has a half a tank of fuel, you would not bid as high for more fuel if you didn't like the price. If your car now has 1/8th of a tank you are likely to bid more than before. if the low fuel light is on, you are likely to bid even more.
So an auction is not always a prime example of a free market.
What am I bid for my fourteen old but working 80/160/320GB drives? I have 4/3/7 respectively. Nawhhh, just joshing....I'll keep them.
You are probably wise to keep them. At the moment I have a hard drive that may not be too far from failing, so I've pulled out a few older smaller capacity HD's. they are like little lifeboats at this point in time. Prices do seem to be dropping a bit though now but it seems to be mainly the slower 5400RPM drives.
I smell an opportunity
1. Be a hard disk manufacturer.
2. Open a trading desk.
3. Control supply by stopping/starting production.
4. Buy/Sell options/futures.
5. Treat traders like rockstars.
6. Mark to market accounting.
7. Get employees to invest in own company (optional).
What could go wrong? ;)
Is it time for De Beers to give up on diamonds, and enter the HDD market?