The Eisverkäuferproblem
-a case of principal failure of the invisible hand?
The Eisverkäuferproblem comes from game theory and describes the strategies of two
sellers in a free market. There should be an example of the failure of the free market, that is the unfettered operation of the invisible hand. Is that really so?
The problem
Imagine a beautiful sandy beach with many beach chairs evenly distributed. It was high season and all the beach chairs occupied
The beach is 2 km long and 100m wide, bounded on the north by the blue sea and the south by a promenade.
On the beach there are two ice cream vendors with ice cream cart, which, because of their relatively high weight only on the promenade, but can move through the sand.
with ice cream cart ice cream vendors ( Playmobil brochure)
offer two kinds of ice cream on the same ice cream vendor at the same prices. As an instrument of competition so that remains is the change in the sales site. What will the ice cream man?
The solutions
The cartel
The ice cream man speak off each other and confess to each other in each half of the beach as their catchment area. They thus represent a cartel. The optimal location is then at the middle of the catchment area, thereby avoiding the customers the shortest way to "their" ice cream truck have. The best solution for everyone!
Optimal locations of the ice cream vendor in a cartel with no real
competition between the ice cream man (Source: Wikipedia changed)
Free competition
now chooses an ice cream vendor (E1) to keep no more of the agreement, so he breaks the cartel. He moved his ice cream truck to win something for the middle of the beach promenade back and hopes to new customers from the existing catchment area of the other ice cream man (E2). Because for some of the recent clients are the ways of E2 to E1 so now shorter. The ice cream vendor E2 can not let go and move his ice cream truck now also points to the center. The catchment areas are again equal, but has anything changed for the customer. For customers at the edges of the beach the way have become longer, the Customers in the beach center forward on the other hand, the shorter route to the ice.
The two ice cream vendors to continue your game on site. One brings something to the middle, but gains only a short-term advantage, because the others are also moving to the center in order not to fall behind. Finally, the two ice cream vendors are directly opposite in the middle of the beach promenade, and there is no possibility for a meaningful "turn". For customers, but overall the situation has become much worse, because the average distance to the ice for most of them have become longer, and the guests that their beach chairs at the edges of the beach will have to do without perhaps fully on their ice. In such a case, the fall turnover of the two ice cream vendors E1 and E2, which lose too.
So it looks really so, as if the free competition, the invisible hand can be effective, the customer that are here for the common good, a bad disservice.
But the Invisible Hand has played out in reality not all the stockings, because the dissatisfied customers, especially at the edges of the beach, open for new competitors (E3, E4) promising market prospects than before. Since the two ice cream vendors E1 and E2, which previously controlled the market have hiked in the middle is enough room for the competition there.
Unfavorable locations of the two ice cream vendors under free competition,
but it opens up market opportunities for other competitors
(Source: modified Wikipedia ,)
not order to lose large portions of their current catchment areas, must E1 and E2, re-orient toward the edges of the beach, clear the middle of the beach promenade so again. In the end, a uniform distribution of the ice cream man is on the whole beach promenade. The paths of their customers are now shorter than ever ice. The invisible hand has it in the end still made it.!
The conditions
The Eisverkäuferproblem but makes one thing clear. The invisible hand can work properly only in a truly free market. Without a free market entry for new competitors, it would have stayed with the bad solution for most customers, since the two ice cream vendors would then be left in the middle of the beach promenade. Just the always existing possibility that the emergence of new competitors would have likely prevented the two ice cream vendors all the way to the center of the beach promenade advance. Because they had to take on the many disgruntled customers at the outer edge of their respective catchment area into account.
is important but also a sufficient size of the market, otherwise take a market entry for new suppliers to no case, there simply are not enough customers. This is also an argument for free trade between nations
because tariffs or other trade barriers inevitably reduce the size of the markets.
Hedda Heuer
Jens Christian Heuer
Literature:
Wikipedia
( http://de.wikipedia.org/wiki/Eisverk% C3% A4ufer-on-beach problem )
