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Auerbach Weighs in for gTLD Lotteries
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Fnord's points are all well taken. Of course, many SLDs are used for non-web purposes. Of course, there are defensive registrations. By "inventory" I meant to refer to speculative inventories--and I am happy to adopt Fnord's more precise usage of this term. Further, I apologize for confusing Fnord with the Anonymous poster whose messages I had been responding to up until this point on this issue.
On the question whether there was a pyramid scheme, it still seems clear that at best there is a loose analogy between the economics of domain name sales and the economics of a pyramid scheme. Here is what Fnord wrote:
At every step down this pyramid the price goes up, not normally because there is any value added but simply because the seller has control of what has at least the perception of being a scarce resource. In addition at most levels in this chain there are claims made by the sellers about the supposed scarcity, and supposed value, that are at odds with reality (compare this, for example, with pyramid schemes selling snake oil purported to be the cure for cancer or other illnesses). False claims, false scarcity, upping the price at each level without actually adding value, this all smells, or rather stinks, of a pyramid scheme for all practical purposes.
I want to concede that there are undoubtedly cases of misrepresentation, but this is economically a quite different phenomenon from a pyramid scheme--where each new recruit is told that they must bring in some number N of new recruits in order to recieve the promised payoffs. No one on this thread has given any argument that this feature (exponential growth at each layer of the pyramid) has ever been characteristic of the market in domain names. Perhaps, somewhere, someone was running a true pyramid scheme involving domain names, but none of the phenomena identified by Fnord or the anonymous poster correspond to the characteristics that are criterial for a true pyramid scheme.
The phenomena that Fnord identifies are charcteristic of a quite different economic phenomenon--a speculative bubble. Speculative bubbles involve inflated claims of value, a lack of correspondence between market price and underlying economic realities, and resale of the same commodity good for higher and higer prices. If Fnord's point is that domain name sales have involved a speculative bubble and that speculative bubbles like pyramid schemes are undesirable, I absolutely agree.Lawrence Solum
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