Bryan Caplan asks whether statistical discrimination prevents good products from being adopted by retailers
[I]magine this hypothetical. Suppose you have a genuinely new and improved t.v. which would be profitable to manufacture if you had a serious order from Best Buy. What could you do to get Best Buy to start carrying it? How would you even get Best Buy’s buyer to take your calls? Could statistical discrimination (most people like you are too useless even to talk to) keep a good idea off the market for good?
The solution to this problem seems simple: retailers should charge a submission fee to review products for which there is little information. This would weed out people who are not confident in their own products and cover the cost of reviewing products that are not eventually accepted.
In the case of books (which Bryan mentions), a $300 submission fee would certainly cover the cost of having a competent person research whether the book should go in the store. This function could probably even be outsourced to a separate company. I am surprised that booksellers do not already do similar things. Am I missing something? Or do retailers already do this?
Good Morning, Economics 
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April 10, 2008 at 12:49 pm
Alex Loddengaard
How do you think this would scale? I agree with your proposed solution in principal, but I’ll bet that if this were really implemented, the overhead associated with “The Department of Approval” would be large. Each company would need some set of moderately intelligent people approving or denying, and this set of people would need at least one manager. Perhaps this organization could raise the cost if they had too much demand for approval? What do you think?
April 11, 2008 at 12:42 am
jsalvati
It’s true that there would be overhead, but I have a hard time imagining the overhead being huge. And, like you said, they could just raise the submission fee until it covers their costs.
Incidentally, I think this would be relatively to “crowdsource” over the internet using prediction markets (though they are generally in a legal gray area for now), which would lower the overhead costs dramatically. I am going to try to post about that soon. I’d probably even seriously consider setting up a website to do that if prediction markets didn’t have legal problems.
April 16, 2008 at 7:51 am
Harisnya
yes, this organization will raise all costs
but no lowers the overhead fees
December 7, 2013 at 8:58 pm
washingtonfreeman
I think this is done through agent networks. For instance, my company is in the process of making a deal with Toshiba through the services of an agent.