Monopolies wouldn't exist in the free market?

[TomCollins]

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Are you just pointing out things you see as predatory pricing or are you saying someone should use force to stop these things from happening?

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Pointing out things for now. Certainly it exists, unlike unicorns. I am also in a business that has used it in the past very well.

[TomCollins]

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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.

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Worst counter-argument ever. Isn't the definition of predatory pricing selling below cost, aka, losing money?

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If it is, its a poor definition. As long as you are selling below competitors costs, it has the exact same effect.

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It's OK to save consumers money, but only if you're making some money. But not too much, then you're price gouging. And we don't have any objective measures for any of this, it's just a matter of whether we like you or not. So watch out.

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Of course, pvn pulls out the strawman on anyone who disagrees with him. Anyone surprised?

[tomdemaine]

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Are you just pointing out things you see as predatory pricing or are you saying someone should use force to stop these things from happening?

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Pointing out things for now. Certainly it exists, unlike unicorns. I am also in a business that has used it in the past very well.

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Fair enough, then you've got no disagreement with me. [img]/images/graemlins/smile.gif[/img] Let me know when you start suggesting force and we'll talk.

[TomCollins]

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Are you just pointing out things you see as predatory pricing or are you saying someone should use force to stop these things from happening?

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Pointing out things for now. Certainly it exists, unlike unicorns. I am also in a business that has used it in the past very well.

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Fair enough, then you've got no disagreement with me. [img]/images/graemlins/smile.gif[/img] Let me know when you start suggesting force and we'll talk.

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Many times the cure is worse than the disease.

[Borodog]

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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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Incorrect. For example, airline prices in Cincinnati. Delta has a near monopoly on the city. Delta has extremely high prices (the airport was the 2nd most expensive in the country last year, behind Honolulu and ahead of Anchorage). If anyone comes in (which airlines have tried to do in the past), Delta drops prices temporarily until they leave.

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Source?

If this is true why doesn't Delta, or some other company, have a near monopoly in every city? There is no possible way that this simple scenario can be the whole story. There are other large airlines that already have most of the capital investment (i.e. the planes) that could move in against which Delta has no fixed cost edge and "predatory pricing" would be suicide. My suspicion is that there are other factors at work, such as special treatment by the airport, which owns the terminals (and which is itself a government-granted monopoly).

[mosdef]

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Absolutely not. When someone tries to come into town, they lower prices on any competing flights. I am not sure if they lose money or make money on these flights. Since they already have all the benefits of having a hub stationed in Cincinnati, their costs of business are going to be lower than the competitor, so if the competitor is making a profit on the route, Delta will make just as much at a cheaper price. As soon as the competitor is gone, they are able to put the prices back up to a much higher level.

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Right, they have won the competition for customers by offering them services at lower cost. By your own admission, when they increase prices to "gouging" levels, other companies swoop in to make a profit by taking their business. Delta then lowers prices to make more profit and take the business back. Then they increase prices. Then other companies swoop in to make a profit by taking their business. Delta then lowers prices to make more profit and take the business back. And on and on and on. This is not illegitimate business practice. It is an ongoing process of market competition. It doesn't remain "in balance" at the market equilibrium because Delta moves off of the market equilibrium when other companies get out of the business, thereby changing Delta's maximum profit price. They can't be faulted for reacting rationally to the choice the other players make (rationally) to leave the market. The fact that the price they charge during periods of time where competitors are not present is higher than your personal subjective preference value of the service is not an example of price gouging.

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I've seen it many times. Its very good for the consumer WHEN the competitor tries to come in. However, they haven't come in in a long time.

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Perhaps because they recognize the futility of trying to make money by selling products for more than their competitors can? Why should they be protected against losing the competition with Delta?

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The entire Cincy airport is Delta, Comair (owned by Delta), partner 50 seater planes (Northwest Express, Continental Express), and a handful of American 50 seater planes.

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Why? Does Delta exclude them by force? Does the government? What is the solution to this "problem"? Forcing Delta to keep prices above a certain level so they don't get too much market share? That's how consumers will be protected?

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This is why the prices are the HIGHEST in the country for no reason other than there is no competition and Delta has the stranglehold to squeeze customers. Driving 2 hours to fly out of another airport to fly back into the same airport in order to get a reasonable fare doesn't seem like the consumer winning to me.

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Nobody owes you a flight from a certain location for a certain price. My heart bleeds for you suffering such an inconvenience. Nonetheless, the market isn't failing when it doesn't offer you everything you want at prices you find acceptable.

[TomCollins]

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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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Incorrect. For example, airline prices in Cincinnati. Delta has a near monopoly on the city. Delta has extremely high prices (the airport was the 2nd most expensive in the country last year, behind Honolulu and ahead of Anchorage). If anyone comes in (which airlines have tried to do in the past), Delta drops prices temporarily until they leave.

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Source?

If this is true why doesn't Delta, or some other company, have a near monopoly in every city? There is no possible way that this simple scenario can be the whole story. There are other large airlines that already have most of the capital investment (i.e. the planes) that could move in against which Delta has no fixed cost edge and "predatory pricing" would be suicide. My suspicion is that there are other factors at work, such as special treatment by the airport, which owns the terminals (and which is itself a government-granted monopoly).

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Typical ACist tactic- when counter example is found to outrageous claims- find a way to blame the government.

It may be true. I found a quote from the Southwest CEO who was quoted as saying he doesn't want to move into that kind of environment and face competition from Delta. Much of the expansion of the airport was paid for by Delta (if I remember correctly). They may have a deal where they get the terminals rent free, yet other airlines have to pay. It is all speculation on my part, I am not an expert on it. Even if the airport was a completely private enterprise, the exact same thing would be likely to happen. You think that an economy of a moderate size like Cincinnati would support 2 airports in close proximity?

[Borodog]

Barron,

The entire purpose of anti-trust law is to be a protectionist weapon for uncompetitive companies to limit competition.

Oh noes, they be linkin' mah Mises:
The Truth About Sherman
The Protectionist Roots of Anti-Trust
Anti-Trust Policy
Antitrust: The Case For Repeal (2nd ed. full text, pdf)

From Cato:
On the Origins of the Sherman Anti-Trust Act
Cato's Anti-Trust Handbook for Congress

A bunch from the Foundation for Economic Education:
http://www.fee.org/publications/the-...le.asp?aid=295
http://www.fee.org/publications/the-...e.asp?aid=1795
http://www.fee.org/publications/the-...e.asp?aid=2775
http://www.fee.org/publications/the-...e.asp?aid=2684
http://www.fee.org/publications/the-...e.asp?aid=4626

[Borodog]

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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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Incorrect. For example, airline prices in Cincinnati. Delta has a near monopoly on the city. Delta has extremely high prices (the airport was the 2nd most expensive in the country last year, behind Honolulu and ahead of Anchorage). If anyone comes in (which airlines have tried to do in the past), Delta drops prices temporarily until they leave.

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Source?

If this is true why doesn't Delta, or some other company, have a near monopoly in every city? There is no possible way that this simple scenario can be the whole story. There are other large airlines that already have most of the capital investment (i.e. the planes) that could move in against which Delta has no fixed cost edge and "predatory pricing" would be suicide. My suspicion is that there are other factors at work, such as special treatment by the airport, which owns the terminals (and which is itself a government-granted monopoly).

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Typical ACist tactic- when counter example is found to outrageous claims- find a way to blame the government.

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When something appears to [censored] up, it's probably a good idea to take a look at the biggest supplier of [censored] ups when you are looking for the source. [img]/images/graemlins/tongue.gif[/img]

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It may be true. I found a quote from the Southwest CEO who was quoted as saying he doesn't want to move into that kind of environment and face competition from Delta. Much of the expansion of the airport was paid for by Delta (if I remember correctly). They may have a deal where they get the terminals rent free, yet other airlines have to pay. It is all speculation on my part, I am not an expert on it. Even if the airport was a completely private enterprise, the exact same thing would be likely to happen.

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Thank you Carnac, for your extensive economic analysis supporting your counterfactual claims.

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You think that an economy of a moderate size like Cincinnati would support 2 airports in close proximity?

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Apparently so. Wasn't it you that told me that airline prices in Cincinnati are among the highest in the nation? What do you think that means, anyway? It means *supply* is being artificially *limited* relative to demand. Whenever you see this, you can bet your ass there is government protection going on somewhere.

You claim that this somehow magically occurs on the free market, when really all that would have to be done to change it is an evil capitalist would have to see this profit waiting to be exploited, buy some land, pave some runways, throw up some terminals and invite in competing airlines. The fact that this *hasn't* occured is probably because governments won't grant the requisite permits and licenses, i.e. airports are government-granted and protected monopolies, just like telephone, electrical power, cable, and other municipal utility monopolies

Besides, the Cincinnati metro area has a population of 2.2 million, the 20th largest in the country.

[pvn]

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This pvn guy can't even spell microeconomics.

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Brilliantly argued as always.