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    Auerbach Weighs in for gTLD Lotteries | Log in/Create an Account | Top | 49 comments | Search Discussion
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    Re:Pyramid Schemes
    by Anonymous on Wednesday April 09 2003, @11:55AM (#11477)
    Let's take an example. A consumer in the services market place is interested in "acquiring" abc.existingtld. It's not available (a common occurrence that is without debate). This consumer (or new member)is driven to the after-market where the average price to acquire is 10 x normal retail. The after-market is filled with accredited parties motivated to acquire deleted domain names because this is where new members for DNS services are being driven to. This is a fact else these accredited parties would not invest their time and resources into it. One particular accredited party invents a wait list service for a fee (for similar motivations as those by the accredited parties investing resources to acquire deleted domains). Any consumer in the DNS services market place that chooses to participate is, by default, a new member to the scheme. The artificial restriction of abc.newtld maximizes the pyramid scheme driving up costs of participation with the existing services market place. It is the recruitment of new members to existing practices for personal gain rather than motivating the sale of near similar goods and services into the market place (i.e. mechanisms to influence the existence of secondlevel.newtld that is fully within the authority of the stakeholder parties dictating the scheme).
    [ Reply to This | Parent ]
    Re:Pyramid Schemes by Anonymous
    Re:Pyramid Schemes
    by lsolum on Wednesday April 09 2003, @02:26PM (#11478)
    User #3416 Info | http://lsolum.blogspot.com/
    The anonymous poster writes:
      One particular accredited party invents a wait list service for a fee (for similar motivations as those by the accredited parties investing resources to acquire deleted domains). Any consumer in the DNS services market place that chooses to participate is, by default, a new member to the scheme. The artificial restriction of abc.newtld maximizes the pyramid scheme driving up costs of participation with the existing services market place.
    This is not a pyramid scheme. This is simply a market with artificially restricted supply (i.e. a static or viturally static root). In addition to the artificial scarcity, there is also a contractual restriction that prevents price discrimination based on desirability of particular strings. The phenomena that are described--1) higher prices in the aftermarket, and 2) third-party intermediaries that facilitate transactions for desirable strings with lapsed registrations--are normal market responses to the artificial restrictions. But they are not a pyramid scheme. This is simply the market response to artificial scarcity. The soltuion is to end the artificial scarcity by auctioning off new gTLDs. This will create price competition, and will naturally drive prices down. In a pyramid scheme, there is no product or service being sold. In the aftermarket for SLDs, there is a product, but artificial scarcity drives up the price. These phenomenon are radically different from the point of view of economic theory. The prior post by the anonymous poster actually makes this same point:
      artificially restricting new second level domains to the consumer market place that is in near infinite supply is the same as NOT allowing DNS services for sale into the market place that, in turn, drives (new) members that desire to participate to do so under established rules of the status quo to the personal gain of a minority few. That's a mouthful that you have not refuted.
    Two comments here:
      First, the point about artificial restriction is absolutely correct. If supply is artificially restricted, prices go up.
       
      Second, such artificial restrictions result in economic rents ("the personal of a minority few") that would not exist without the artificial supply restrictions.
       
      Third, although this is bad policy, it is not a pyramid scheme.
    In sum, I believe that agree with the core substance of the anonymous posters remarks--which I take to be an argument against artificial supply constraints--but I strongly disagree with the suggestion that such artificial constrainst constitute a pyramid scheme. If the anonymous poster means to say that the artificial supply constrains are morally equivalent to a pyramid scheme, that is another matter. I am not sure I agree with that statement, but I do agree that artificial supply constraints that result in artificially high prices without economic justification are undesirable.Lawrence Solum
    [ Reply to This | Parent ]


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