10 Years ago for Scott Adams

Scott Adams, of Dilbert fame, returns today to his prediction about confusopolies. Here is the prediction:

In the future, all barriers to entry will go away and companies will be forced to form what I call “confusopolies”.

Confusopoly: A group of companies with similar products who intentionally confuse customers instead of competing on price.

And he goes on a decade later:

Thanks to the Internet, relatively efficient capital markets, and the fact that some company in China can make just about anything, anyone with drive can start just about any kind of company. The interesting part is that in the near future it can never be profitable to do so, because a hundred other people will start the same company next week and drive down your margins. Your only defense is to be confusing, so customers believe, incorrectly, that your product has advantages.

I have long been intruiged by this as, superficially at least, it seems to describe alot of behaviour. Indeed, I documented that behaviour here (for gas retailing) and here (for telecommunications).

While not using the term confusopoly economists are divided over it. For instance, Adam Brandenburger and Barry Nalebuff don’t think confusion is a good idea (see also this) whereas Glenn Ellison can see it emerging.

Of course, in his post today, Adams noted that he has Google Alerts set up to tell him when someone is writing about him on the Internet. I figured that this would be a good day to post about him and perhaps gratutiously link to Parentonomics: An Economist Dad Looks at Parenting (out in Australia now and in the rest of the world from MIT Press in early 2009; Amazon pre-order here). He talks about celebrity endorsements and I could use them. What could be less confusing than that!