[ojc02]

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Ah ok, I only asked because it seemed like you could draw a dead-weight-loss equivalent in the labor market caused by the minimum wage.

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Indeed the same ideas apply.

Just to make that clear (nothing to do with minimum wages), the tragedy with natural monopolies is that it's efficient to have a monopoly - due to decreasing average cost that are higher than the marginal cost - as it can and eventually will produce at minimum average cost. Only problem is how to make sure the monopolist in the end doesn't charge the Cournot price resulting in the well known dead weight loss.

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So while I accept that natural monopolies are possible in the short run, I don't think they can possibly survive long term due to advances in technology etc. Also, it's only a few industries that can possibly produce a natural monopoly in the short run. That's why I don't think there needs to be any effort to prevent them

Ultimately, even in the most commoditized industries, no two companies are identical and those differences mean that economic profits will be made. Trying to prevent economic profits just isn't feasible and leads to situations where companies are afraid of succeeding because they fear the nightmare of getting accused of an anti-trust violation. You get situations where GM's policy is to not make their cars so good or inexpensive that they achieve greater than 45% market share.

Edit: Woah! My 500th post!! [img]/images/graemlins/smile.gif[/img]