Monopolies wouldn't exist in the free market?

[Copernicus]

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I think that what is trivially clear is that there would be SOME price movement in a free market that SOME people would label "monopolistic price gouging". The debate has really been about whether or not we should be calling these companies "monopolies" (which is a term loaded with negative connotations) or "winners of the business competition".



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I'd be interested to know, in terms of ROI, what people consider monopoly profits. Because when we are talking about monopolies thats all that matter, the cost to consumers.

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I dont know that absolute ROI is relevant. PokerStars doesnt have a monopoly, but its ROI is obscenely high. OTOH ATTs pre-breakup ROI, despite many of its infrastructure costs having been fully depreciated, never had a particularly high ROI, but most here would claim that ATT was a (government created) monopoly.

[mosdef]

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I think that what is trivially clear is that there would be SOME price movement in a free market that SOME people would label "monopolistic price gouging". The debate has really been about whether or not we should be calling these companies "monopolies" (which is a term loaded with negative connotations) or "winners of the business competition".



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I'd be interested to know, in terms of ROI, what people consider monopoly profits. Because when we are talking about monopolies thats all that matter, the cost to consumers.

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I think most people would define monopoly by market share, not ROI. Namely, 100% market share.

The tangential issue of "price gouging" has more to do with ROI, and I don't think the absolute ROI is relevant. I think any ROI that is so high that it invites new business competition at lower ROI would be a good measure. Of course then you don't have a monopoly.

Finally, the real (unrecognized) answer of course is that we think that a company's ROI is too high when they price their products higher than we value them. How this gets distorted into "they're a price gouging monopoly" is beyond me.

[ianlippert]

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I think most people would define monopoly by market share, not ROI. Namely, 100% market share.


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So if they have 100% marketshare but say a normal ROI of 3-5% do we really care if they are the only provider of goods? To me its ROI that matters in the definition of monopoly even if classical econ texts books will define it as market share.

[Copernicus]

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I think most people would define monopoly by market share, not ROI. Namely, 100% market share.


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So if they have 100% marketshare but say a normal ROI of 3-5% do we really care if they are the only provider of goods? To me its ROI that matters in the definition of monopoly even if classical econ texts books will define it as market share.

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I dont think markets with two or three competitors that cooperate (implicitly or explicitly) have any less potential to harm the consumer than monopolies, so market share isnt a perfect measure.

The ROI issue, of course, is addressed in the case of utilities by regulatory bodies, one of the few businesses where I think regulation is appropriate, and cannot be shown to have harmed the consumer.

[DcifrThs]

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if MSFT was left to its own devices, there wouldn't be any thriving competitors.

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I disagree, and I think the Microsoft case is interesting. Microsoft has been under assault from regulators since the mid 1980s. They've had consent decrees, settlements, lost cases, and lots of lawyer fees. None of which have made a bit of difference in how they do business, their market share, or their prognosis. This latest case is no different. Publishing the SMB protocol won't cost MS market share. However today MS is changing how they do business, has lost mind share, and the prognosis for growth is poor, all due to market forces.

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those cases may not have shown large decreases in market share, but what they don't show is what MSFT could have done had there been no regulators. they had to walk on eggshells so to speak so as to not invite further regulation. they could have locked other software programs out purposefully etc. etc.

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Suppose all anti-trust rules are repealed today. How does MS use their own devices to eliminate:
Google, linux, Apple, Oracle, Apache, Sun, FireFox, AOL, Nintendo, GCC, Gimp, Samba, ...
Does MS have nuclear weapons?

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MSFT doesn't have nuclear weapons.

and the market has changed significantly over the years. eliminating regulations now wouldn't be as significant as there never having been regulations.

but, still, out of those companies, i'd think MSFT would eventually overtake most if not all of those competitors in some business sectors. google isnow absolutely entrenched and probably the hardest to overcome...but who knows what would come out without anybody telling MSFT (or other companies) that they can't preculde competitors from their OS or whatever.

note that i'm no expert in monopolistic market mechanics or computer software or anything really...i'm just thinking out loud.

Barron

[calmB4storm]

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utilities...one of the few businesses where I think regulation is appropriate, and cannot be shown to have harmed the consumer.

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http://en.wikipedia.org/wiki/Califor...tricity_crisis

[Adebisi]

Regarding predatory pricing, some of you seem to be arguing that companies using this method would be running at a loss. That's not necessarily the case. If Walmart decided to open a new superstore in deleted, Mississippi, they could that operate that particular store at a loss for a year or two until Mom and Pops Hardware and Bubba's General store go out of business. The loss they take on that one store would hardly constitue a blip on their bottom line when there are tens of thousands of already-established Walmart locations.

[DcifrThs]

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Regarding predatory pricing, some of you seem to be arguing that companies using this method would be running at a loss. That's not necessarily the case. If Walmart decided to open a new superstore in deleted, Mississippi, they could that operate that particular store at a loss for a year or two until Mom and Pops Hardware and Bubba's General store go out of business. The loss they take on that one store would hardly constitue a blip on their bottom line when there are tens of thousands of already-established Walmart locations.

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i'm not so sure about this example. walmart used huge improvements in technology and inventory management to reduce costs. so they just really outcompeted the mom and pop stores and don't have to operate at a loss. their operation is such that they get such low prices that other stores can't compete.

no predatory pricing necessary.

i think your general point though is well taken though since a store can't compete with 1 location vs. some chain willing to operate at a small loss at that one location.

but the counter argument is if they are constantly doing that, then they will be overall operating at a loss.

anyways, there have to be better examples, but maybe on the right track...

Barron

[pvn]

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those cases may not have shown large decreases in market share, but what they don't show is what MSFT could have done had there been no regulators. they had to walk on eggshells so to speak so as to not invite further regulation. they could have locked other software programs out purposefully etc. etc.

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SO WHAT?

Why is this so awful? Why should MS be *compelled* to make their products work with other products?

My cell phone comes with a proprietary battery. The phone manufacturer *could* have used a standard battery for basically zero cost difference. But they chose this nonstandard battery. Have they done something "evil" here? BTW, third party battery makers can still make batteries for this phone, but it requires them to retool their manufacturing lines, which is expensive.

My BrandX printer uses BrandX ink cartridges. BrandX cartridges are different than BrandY and BrandZ cartridges, which happen to fit in either brandY or brandZ printers. Is something bad going on here?

My iPod only works (optimally) with iTunes and the iTunes Music Store. Music I buy from Napster doesn't play as well. Evil?

My MacOS software only works on special hardware manufactured by Apple. They don't license the boot roms that MacOS requires to function. Objectionable?

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but, still, out of those companies, i'd think MSFT would eventually overtake most if not all of those competitors in some business sectors. google isnow absolutely entrenched and probably the hardest to overcome...but who knows what would come out without anybody telling MSFT (or other companies) that they can't preculde competitors from their OS or whatever.

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Wow. Google is "entrenched"? You've got to be kidding me. Google is so vulnerable it's ridiculous. All you have to do is type "newsearchengine.com" instead of "google.com". There is literally zero cost to consumers for switching. How do you think google got where it is in the first place, in the face of what was then then "entrenched" market dominators (Yahoo, AltaVista). AltaVista was, for quite a while, THE search engine. And it was backed by big money (DEC, Compaq, CMGI). And as soon as something a little bit better came along, poof, it was in the toilet. Now most people don't even know what it was.

The barriers to entry here are *ridiculously* low. Google got to the top of the heap with relatively little money, just a product that was good enough to be a significant improvement.

[BCPVP]

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Regarding predatory pricing, some of you seem to be arguing that companies using this method would be running at a loss. That's not necessarily the case. If Walmart decided to open a new superstore in deleted, Mississippi, they could that operate that particular store at a loss for a year or two until Mom and Pops Hardware and Bubba's General store go out of business. The loss they take on that one store would hardly constitue a blip on their bottom line when there are tens of thousands of already-established Walmart locations.

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Have you even read any of the arguments given here against predatory pricing? Restating the hypothetical predatory pricing example doesn't help the discussion at all.