Hirano market model: buy cheaper, get more pay

Summary of Hirano Market Model for disparity and growth with information technology

Summary for non economists, Aug. 20th, 2022-

HIRANO Satoshi Ph.D., Peace and Passion

A model means a mock-up that we use when building a theory. Hirano market model (HMM) is a new hypothesis for overcoming the disparity issue. The meaning of "cheap" in this site is that, when you purchase something, though sometimes cheap and sometimes not, we expect cheaper than the current your purchase prices in a general trend in short and middle term. In long term, in order to increase added value sellers need to raise prices.

It's a precious challenge for our future. Though I know there are many problems, we have to go forward. If you have an opinion or question, send an email to me rather than writing anything negative on an article.

"Power law" is invading our lives and lowering salaries

Small and mid-sized companies account for 99% of the number of companies in many countries, and they can't afford to raise employees' salary.

What we need is a mechanism to increase the sales of small businesses. Increasing the sales of small and medium-sized companies will increase employees wages and purchasing power, so grow the local economy. The middle class will become thicker, and everyone's wages and national and local government tax revenues will increase. Provides financial resources for those in need of education and welfare.

Click through rate of Google

Well, except for food and daily necessities that we can buy near our home, we search first to find products and shops in almost all shopping.

Online shops and search engines display results in order of price, number of reviews, and number of ratings. Due to performance reasons, it has to be displayed in the order in which it is stored in the database, so every listing must be some sort of ranking.

The chart above shows the click through rate ranking of the top 20 links in Google search results. Contrary to intuition, it is an extreme downward slope, not a straight line.

Purchasers (those who wish to purchase) will investigate until they are satisfied, starting from the top of the ranking. The 7th has less than 3%, so you can see that most people look into companies between 1st and 6th.

Orders are concentrated on sellers and products with high ratings and reviews, so they can sell higher with brand power. Since profits are reinvested in improving search rankings and evaluation scores, sales increase with compound interest.

Even if companies at lower ranks have a good product or service, they won't sell because they won't be seen. There is no choice but to make it cheaper and cut the labor costs of employees and to compete to lower prices.

The rich get richer and the poor get poorer. We're dying in the ranking hell.

This graph-like structure is called a "power law" and can be seen in various social and natural phenomena. The 80:20 rule is one of them. The business of creating rankings and selling ads to the lower is thriving.

Transcending the Power Law with "Invisible Breeze"

Requestland does not have rankings in order not to be bound by the power law. Even if you don't research yourself, sellers will suggest something that suits your purposes.

If buyer A writes in a request, for example, "Please paint the exterior wall of my house. I would like to consult with 3 companies (choose from 1 to 6)" will suggest a variety of things that suit your purpose. That is also applicable when you're buying a used car or looking for a piano teacher. Pick and choose what you like from the offers. It's simple.

Seller B is a salesperson of a paint shop, which is an average small business. Seller B reads the request and makes an entry if he wants to sell, but he pays the entry fee that he can decide himself. Zero fee is also OK. Requestland (the land) will select up to 3 sellers from entries with a probability according to entry fees. If seller B is selected, he makes a proposal that suits buyer A and sells it.

Probability is a zero-cost 'invisible breeze' that reaches every corner of the world and transcends the power law of human activity. Excessive competition is mitigated.

Hirano market model

Cheaper than buying in popularity ranking

Purchase prices are in the chart below. In the case of products that have brand power at the top of the popularity ranking, the top companies have higher prices and the lower companies have lower prices, with a downward sloping curve.

For example, buyer A, who thought that buying the same thing as others would be safe, would have bought it at a high price, such as $4,000, from the top of the ranking. This time, of the three companies' proposals, she found that the product recommended by seller B, the average seller, "fits her purposes," so she could buy it at a lower price, say $3,500.

Each purchase may be expensive or inexpensive, but as a general trend, the purchase price is lower than choosing from the top of the popularity ranking like this.

Many sellers will get higher salaries and the economy will grow

Assuming that buyer A bought using rankings, the average ranking of seller B is 10th, so buyer A' click through rate is 1.01%. The chance of sales is 1%.

In the case of the Land, if 20 sellers make entries with the same entry fee, the system will select 3 companies from 20 companies with the same probability, so they can make offers with a 15% chance. That is 15 times more. You can add value by making proposals using your product knowledge.

And seller B can sell with a 1/3 probability of 15%, which is 5%. Sell-ability increased five-fold, from 1% to 5%.

Here is a magic. While the buyer buys cheaper than before, the sellers have more sales even though they sell at the same prices.

When the more sales increase added value, as the salary is determined alongside added value, the salary increases.

If ten companies make entries, the sales probability is 10% for a company, so it is 10 times 1%. Sellers up to the third place have click rate of 10% or less, so they can gain a profit. If a company ranked higher than three uses high advertising costs to stay at the top, they may be able to increase profits by shifting the advertising costs to entry fees for the Land.

The bigger the company, the more time is spent in meetings and the more impressive the headquarters, the lower the productivity (diminishing returns). Since the added value obtained by selling the same price product is greater for lower-ranked sellers (smaller firms) than for higher-ranked sellers (larger firms), the total value added (GDP) will increase. That is, if the lower-ranked sellers sell more, the economy will grow.

If you place requests in your region on the Land map and buy things from nearby shops, the money will circulate in that region. Firms hire more people when their sales increase.

When you want to buy cheapest, please research yourself from the beginning with Banban board. The request is not a tool to pursue the cheapest, rather the request aims to mitigate excessive competition for everyone to have more income. Good sellers don't enter a place where they are always demanded for a lowest price.

Efficient and low cost

For example, when you are watching a video on a free video service, you will see ads. About 1% of people are interested in clicking on an ad, and 99% of people find it a nuisance. It consumes so much precious time of people. The fee for online advertising is surprisingly high for sellers, but if they stop advertising, sales will decrease.

In Land, only those who want to write requests, so there is no waste of time of both buyers and sellers, and it is highly cost-effective. They can keep your selling costs down.

Product prices and store prices

In the case of a home appliance like a washing machine, a seller could suggest a product that doesn't rank high in search results due to low advertising costs but is adequate and inexpensive for your needs. Such proposals have the advantage that you can buy good products and save time and money. However, if you search by the model number of the product, you may find a store that sells it cheaper than the seller who suggested it. Since it takes labor costs to make proposals, it will be higher than the lowest price of unmanned online stores. In that case you will have a dilemma.

A request displays two numbers (counters) of previous requests and purchases made by the buyer. When you buy at the store, both the numbers increase. If you don't buy, the purchases counter will not increase.

Sellers want to treat people who buy a lot politely, and don't want make entry to request by people who just consulted and didn't buy. Therefore, if you want to buy cheap things like home appliances whose price is well known, it is better to to find out from the beginning by yourself with Banban board.

If you often sell what you bought at a flea market and end up buying a similar thing again, it's better to get advice on your request and buy it to avoid mistakes, and in the end it'll be cheaper.

Our profit minimization

If the Land would make big profits, similar markets should emerge. If a buyer would write a request in multiple markets, the limiting to three companies would be broken, and disparities would not be eliminated. So, we sincerely would like to ask not to make a similar market. The land is protected by US and Japanese patents. As we don't work for profit, the system works with the profit minimization algorithm. Our office is located in a student apartment next to the university dormitory.

Hirano market model is such a market model that encourages progress through appropriate competition, alleviates excessive competition, and increases income for everyone.