by Joshua Gains Harry Truman famously begged for a one-handed economist. Why? He was sick of his economic advisers saying "on the other hand." Charles Schultz expressed similar frustration here. The idea that economists hedge their bets or disagree constantly with one another is a feature of the discipline. We see it today over issues such as the deficit and health care reform.
But right now, there is one issue on which every economist I know of actually agrees (and in an unqualified way): that Groupon (a) should have accepted the purported $6 billion bid from Google when it had the chance; (b) that Google was insane to have offered it; and (c) that Groupon is pretty much doomed or, at least, will have fleeting glory. Put simply, the new coupon industry is following a path common to so many new markets, with a leader with initial success, a flurry of entrants (at last count some 400 competitors) and, finally, a big shakeout.
Of course, Groupon could be left standing after the shakeout, as Amazon and eBay were in days of old. But even if it makes the cut, the notion that it could earn persistently high profits seems far-fetched. Economists want to see what Groupon uniquely controls. The baseline idea — heavily discounted coupons delivered to inboxes — is easy to copy. The costs Groupon faces are not the low marginal costs of an Internet business but a business-by-business costly sales effort. Thus, there do not appear to be scale economies that could keep competitors at bay.
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