Monopolies wouldn't exist in the free market? - Page 3

foal · #1 09-23-2007, 10:50 PM

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just once they start charging crazy prices some other dude can come in and compete with them.

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What happens when he buys the other guy out?

lehighguy · #2 09-23-2007, 11:27 PM

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just once they start charging crazy prices some other dude can come in and compete with them.

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What happens when he buys the other guy out?

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Then another person will take thier place...and another...and another, until our original monopolist runs out of checks to buy companies with.

As long as you charge a price higher then a potential competitor could sell for, there will be people willing to enter the market.

pvn · #3 09-23-2007, 11:55 PM

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just once they start charging crazy prices some other dude can come in and compete with them.

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What happens when he buys the other guy out?

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When a "monopolist" starts buying everyone out, he's ENCOURAGING other people to enter the market, specifically because they know they can make a quick buck getting bought out.

When this happens, you can't buy everyone out. Rockefeller tried. When he failed, he turned to government to erect barriers to entry in the refinery market, under the guise of "safety standards".

vhawk01 · #4 09-24-2007, 12:32 AM

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just once they start charging crazy prices some other dude can come in and compete with them.

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What happens when he buys the other guy out?

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Then I step in.

But what happens when he buys me out?

Then you step in.

See?

TomVeil · #5 09-24-2007, 01:02 AM

Any buisness man worth his salt wouldn't run his monopoly that way though. He wouldn't buy out the competition outright. He'd simply run his buisness differently in order to drive him out of buisness. What's the difference in paying somebody 100K to get out of the buisness and losing 100K to drive the other guy out of buisness? It discourages the next guy to jump in and try to take some of your buisness when you return your prices to normal.

vhawk01 · #6 09-24-2007, 01:16 AM

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Any buisness man worth his salt wouldn't run his monopoly that way though. He wouldn't buy out the competition outright. He'd simply run his buisness differently in order to drive him out of buisness. What's the difference in paying somebody 100K to get out of the buisness and losing 100K to drive the other guy out of buisness? It discourages the next guy to jump in and try to take some of your buisness when you return your prices to normal.

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Can you elaborate on this a little further? How does he run his business differently? What does he do AFTER he runs the other business into the ground? How does he make it so that no one can exploit his MO?

pvn · #7 09-24-2007, 01:21 AM

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Any buisness man worth his salt wouldn't run his monopoly that way though. He wouldn't buy out the competition outright. He'd simply run his buisness differently in order to drive him out of buisness.

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EXACTLY! He'd try to *outcompete* the other players. And when he does that, consumers benefit.

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What's the difference in paying somebody 100K to get out of the buisness and losing 100K to drive the other guy out of buisness? It discourages the next guy to jump in and try to take some of your buisness when you return your prices to normal.

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Yeah. Nobody can compete with a company that's hemmoraging money!

BCPVP · #8 09-24-2007, 01:25 AM

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Any buisness man worth his salt wouldn't run his monopoly that way though. He wouldn't buy out the competition outright. He'd simply run his buisness differently in order to drive him out of buisness. What's the difference in paying somebody 100K to get out of the buisness and losing 100K to drive the other guy out of buisness? It discourages the next guy to jump in and try to take some of your buisness when you return your prices to normal.

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There are many reasons why this doesn't work. See Thomas DiLorenzo's The Myth of Predatory Pricing, Dominick Armentano's Antitrust and Monopoly and Antitrust Reform: Predatory Practices and the Competitive Process, the
Criticism under the Wiki on Predatory Pricing, or a section of George Reisman's Capitalism for more info.

Borodog · #9 09-24-2007, 01:33 AM

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Any buisness man worth his salt wouldn't run his monopoly that way though. He wouldn't buy out the competition outright. He'd simply run his buisness differently in order to drive him out of buisness. What's the difference in paying somebody 100K to get out of the buisness and losing 100K to drive the other guy out of buisness? It discourages the next guy to jump in and try to take some of your buisness when you return your prices to normal.

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Uh huh. What business are you in, may I ask?

I can just see the pitch to your boss:

"Hey boss! I know how we can corner the market!"

"Oh yeah, Tom? How's that?"

"Well, we just have to suffer continual losses for five to ten years . . . "

"You're fired."

natedogg · #10 09-24-2007, 11:14 AM

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Any buisness man worth his salt wouldn't run his monopoly that way though. He wouldn't buy out the competition outright. He'd simply run his buisness differently in order to drive him out of buisness. What's the difference in paying somebody 100K to get out of the buisness and losing 100K to drive the other guy out of buisness? It discourages the next guy to jump in and try to take some of your buisness when you return your prices to normal.

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You can't win through predatory pricing because short-sellers would destroy your company. Do you see why?

natedogg