Monopolies wouldn't exist in the free market?

[DcifrThs]

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"If a firm were truly able to provide a product better than anyone else could, why couldn't it sustain itself as a monopoly?"

It could. Harmful monopolies cannot exist in a truly free market, but it's certainly possible for some brilliant entrepeneur to corner the market; just once they start charging crazy prices some other dude can come in and compete with them.

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in a free market, are there regulators?

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Sure. Just not any coercively funded ones whose arbitrary decisions creating binding obligations for market participants.

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so who gives the regulators their authority and funding?

what authority would they have?

how would they execute their authority?

and why would regulators be needed if monopolies wouldn't exist in free markets?

thanks,
Barron

[DcifrThs]

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The bad sort of monopoly isn't achieved by undercutting or making a better product, it's achieved by buying up all other providers of that product and then price gouging. This is a hobby of mine in the World of Warcraft auction house.

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Luckily it doesn't work in the real world. "Predatory pricing" is the Unicorn of economics. There's a lot of mythology written about it, but nobody has ever observed it.

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i've mentioned many times before that these sorts of statements are fairly silly to make.

it only takes 1 observation to disprove it. and you cannot prove it until you collect every single observation ever.

i will bet you even money that your statement is incorrect. you should be happy to take this bet if you truly believe your statement. name your amount, we can arrange an escrow and define terms.

Barron

[BCPVP]

Underwriters Laboratories

[TomCollins]

Here is the full table.

average prices of flights
For Q1 2007, it looks like Cincinnati took the lead.

Salt Lake is #20/100 listed.
Atlanta is #11/100 listed.

So it definitely happens, although those airports have more competition (Atlanta served by AirTran). I'm not sure what major carriers are out of SLC.

JFK and SFO are high, but remember they are also on the coasts and would have a large portion of their flights going between coasts (a flight from NYC to LAX would obviously be more expensive than a flight from ATL to LAX). There is also a great deal of competition in those airports.

[DcifrThs]

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The bad sort of monopoly isn't achieved by undercutting or making a better product, it's achieved by buying up all other providers of that product and then price gouging. This is a hobby of mine in the World of Warcraft auction house.

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Luckily it doesn't work in the real world. "Predatory pricing" is the Unicorn of economics. There's a lot of mythology written about it, but nobody has ever observed it.

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i also just realized that this logic is quite strange.

1) predatory pricing doesn't work in the real world. i know this because predatory pricing has never been observed.

2) regulators around the globe are created and tasked with eliminating monopolies and prevent predatory pricing.

oops...see that. bad logic.

non-observance of predatory pricing cannot be attributed to its inability to work in the real world. in fact, you could just as logically argue that the lack of observance of predatory pricing is the result of the regulatory agencies doing a great job. we should give those guys awards.

in addition, there are instances where the predatory pricing (or predatory actions by would be monopolists) were struck down by regulatory agencies. thus we never observed the predatory pricing, but we did observe something that would have very likely led to it.

take microsoft vs. netscape et al. microsoft was barred from its practices by the US regulatory agency. if allowed to continue, do you really think another software company could have even come close to competing with MSFT (given that they would program their world standard operating system to not work with other manufacturer's products?) ? do you think MSFT wouldn't be a monopoly? or not have the ability to price preditorially?

Barron

[mosdef]

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The bad sort of monopoly isn't achieved by undercutting or making a better product, it's achieved by buying up all other providers of that product and then price gouging. This is a hobby of mine in the World of Warcraft auction house.

[/ QUOTE ]

Luckily it doesn't work in the real world. "Predatory pricing" is the Unicorn of economics. There's a lot of mythology written about it, but nobody has ever observed it.

[/ QUOTE ]

i also just realized that this logic is quite strange.

1) predatory pricing doesn't work in the real world. i know this because predatory pricing has never been observed.

2) regulators around the globe are created and tasked with eliminating monopolies and prevent predatory pricing.

oops...see that. bad logic.

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This is only bad logic if you assume that regulators were created to "address problems" (aka interfere in the market) that were actually predatory pricing problems. You need to distinguish between government intervention to fix a market problem, and government regulation based on knee-jerk emotional responses to the natural and fair outcomes of markets. The latter is often disguised as the former, and observation of the latter does not create a problem to Borodog's logic.

[owsley]

That is not the logic why Borodog doesn't think predatory pricing would never work. Predatory pricing doesn't work because:

1. It requires a business to run at a loss for a (long?) period of time. This is obviously awful for businesses who consider it and good for consumers.
2. If a firm actually does manage to run its competitors out of business, the high price level (and profits possible in that industry) will encourage other firms to compete with it. Again, bad for the firm trying it, good for consumers.
3. When a firm goes through stage one, if it is publicly owned and traded, it can be short sold by the general public. This, combined with the whole "running a loss for an indeterminate amount of time" thing are probably why firms don't try this strategy.

Or, there might not be any examples of predatory pricing because government regulation prevented them all. Pretty obvious what side to bet on here IMO...

[DcifrThs]

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The bad sort of monopoly isn't achieved by undercutting or making a better product, it's achieved by buying up all other providers of that product and then price gouging. This is a hobby of mine in the World of Warcraft auction house.

[/ QUOTE ]

Luckily it doesn't work in the real world. "Predatory pricing" is the Unicorn of economics. There's a lot of mythology written about it, but nobody has ever observed it.

[/ QUOTE ]

i also just realized that this logic is quite strange.

1) predatory pricing doesn't work in the real world. i know this because predatory pricing has never been observed.

2) regulators around the globe are created and tasked with eliminating monopolies and prevent predatory pricing.

oops...see that. bad logic.

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This is only bad logic if you assume that regulators were created to "address problems" (aka interfere in the market) that were actually predatory pricing problems.

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i was under the assumption that it is fair to include predatory pricing in the mandate of regulatory agencies.

specifically, i'd think global regulatory mandates are similar to :

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The FTC is charged by statute with preventing unfair methods of competition and unfair
or deceptive acts or practices in or affecting commerce

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thus predatory pricing would fall in there.

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You need to distinguish between government intervention to fix a market problem, and government regulation based on knee-jerk emotional responses to the natural and fair outcomes of markets. The latter is often disguised as the former, and observation of the latter does not create a problem to Borodog's logic.

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but existance of the regulators whose purpose, in all, some or part, is to prevent predatory pricing from occurring, does prevent the statement from being logically sound. by "the statement" i mean that "because predatory pricing has never been observed, it could therefore never work in the real world."

Barron

[pvn]

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Am I missing something? They found an edge where they were more efficient, and pushed that edge to outcompete the other players, resulting in lower prices for consumers from *all* vendors. They couldn't compete with the new lower prices, and got eliminated from the market.

What's "predatory" about this?

What's harming consumers?

[/ QUOTE ] Yes, you are missing something. You are missing the assumption that once the comptetition was crushed, they upped their prices again.

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Why should I assume that? That's the alleged conclusion. If we're going to assume that, there's no point in having the thread in the first place, is there?

[TomCollins]

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That is not the logic why Borodog doesn't think predatory pricing would never work. Predatory pricing doesn't work because:

1. It requires a business to run at a loss for a (long?) period of time. This is obviously awful for businesses who consider it and good for consumers. not true. You just need to be able to have a lower cost of goods than your competitors and make sure THEY don't make a profit.

2. If a firm actually does manage to run its competitors out of business, the high price level (and profits possible in that industry) will encourage other firms to compete with it. Again, bad for the firm trying it, good for consumers. Not when they know that as soon as they come in, the prices will drop and no profit will be made, and they lost any investment they had in getting to market
3. When a firm goes through stage one, if it is publicly owned and traded, it can be short sold by the general public. This, combined with the whole "running a loss for an indeterminate amount of time" thing are probably why firms don't try this strategy.assumes that they take a loss.

Or, there might not be any examples of predatory pricing because government regulation prevented them all. Pretty obvious what side to bet on here IMO...

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