How To Sell a TunaWhat fish markets teach about the economy.

Remarks from the Fray:

Harford notes that the assumptions of market fundamentalists often help them to design failing markets. True enough. But he then goes on to suggest that the Fulton Fish Market is failing, when it allocates better deals to Asian bargain hunters.

This fails to take into account the fact that the bargain hunters are -- duh! -- hunting for bargains. That is, they are investing extra time and effort, which means they incur a greater cost per transaction. One would assume that they're doing this because they end up more satisfied with the transactions they "buy" with all that time. Which is to say, of course they will be the ones to find those bargains; they were the ones who tried. As noted in the article, they have some keen motivation -- price-sensitive customers to whom they must pass along their purchases.

All parties are behaving rationally, here -- an upscale restarateur's costs are dictated at least as much by his staff, rent, and so on, as by the price of ingredients, so it makes no sense for him (or his buyer) to invest large amounts of time in capturing small savings on his fish. For a retailer who's getting fish wholesale to sell to customers who care a lot about price, it does.

--auros

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