Monopolies wouldn't exist in the free market?

[Copernicus]

[ QUOTE ]
[ QUOTE ]
Isn't this exactly predatory pricing?

[/ QUOTE ]
Something tells me there's more to it than that. The model most people describe involves the predator company charging monopoly prices once it is established because they need to make up for the low price during the predation period and because they are now the only firm in the area and can "threaten" potential entrants. Lots of businesses start out with discounts, low prices, etc to gain a foothold in the market otherwise there probably won't be much reason for customers to switch. Unless the new stores offer something different which defeats the point of it being predatory.

I won't say that it's impossible to engage in predatory pricing for a time. But it is very difficult for reasons mentioned as well as documented by many people and so rare that it shouldn't merit the powers conceded to government to "deal" with such practices.

[/ QUOTE ]

told ya to expect that one, phil

[Phil153]

[ QUOTE ]
[ QUOTE ]
Isn't this exactly predatory pricing?

[/ QUOTE ]
Something tells me there's more to it than that. The model most people describe involves the predator company charging monopoly prices once it is established because they need to make up for the low price during the predation period and because they are now the only firm in the area and can "threaten" potential entrants. Lots of businesses start out with discounts, low prices, etc to gain a foothold in the market otherwise there probably won't be much reason for customers to switch. Unless the new stores offer something different which defeats the point of it being predatory.

I won't say that it's impossible to engage in predatory pricing for a time. But it is very difficult for reasons mentioned as well as documented by many people and so rare that it shouldn't merit the powers conceded to government to "deal" with such practices.

[/ QUOTE ]
I agree that the "threat" isn't shown in that example. And I'd also agree that predatory pricing is the weakest example of the many things that could sustain monopoly power.

I find your last comment curious though. Neither predatory pricing nor the threat of nonviolent monopoly are sufficient to justify the a government, by themselves. But that's not the issue. We're comparing the viability of these systems, and specifically the extraordinary claim that business monopoly would be non existent under AC. I'm definitely willing to entertain the notion that monopoly is worse under government, all things considered. I may even set the line more in your favor than mine. But I'll call you a poor thinker if you claim damaging monopoly won't exist at all under AC.

[Felz]

Baumol et al. (1982): "Contestable Markets and the Theory of Industry Structure"

[ianlippert]

[ QUOTE ]
As part of an economics assignment in college, I looked at an Australian Senate report into the Australian supermarket industry. One of the things it looked at was the behavior of supermarket chains in rural areas. The large chains - there are only really three in Australia - would set up shop, and charge city prices for goods, which was below cost once transport was factored in, especially for fruit&veg. This would drive many of the existing small stores out of business. A year of so later, pricing would be consistent with that in other country areas (significantly higher than the city prices they were first charging).


[/ QUOTE ]

Its possible that these supermarkets, once they acquired their foothold and put mom & pop out of business, now provided a better service that the smaller stores couldnt compete with. People love the convenience of the big box stores. To really determine if this was a predatory monopoly we'd need more information. Do you know how much more the monopoly stores were charging over the smaller stores? Do you know what the monopoly stores were making in terms of ROI?

[ianlippert]

[ QUOTE ]
But I'll call you a poor thinker if you claim damaging monopoly won't exist at all under AC.


[/ QUOTE ]

I'd rather deal with minor supermarket monopolies than huge bureaucratic government monopolies that I have next to no ability to avoid.

[Phil153]

Well, here's an extract from the Senate report. I was wrong about charging city prices; in one instance, they charged 20% below city prices in a rural area (i.e. operated at a loss) for an extended period of time.

As for pricing, this testimony, and others in the investigation, reveal some interesting things about pricing:

http://www.aph.gov.au/senate/committ...report/c06.htm
[ QUOTE ]
6.21 In 1993, South Australian retailer, Mr Mark McLauchlan, saw an opportunity in Alice Springs to open an independent store in competition with Woolworths and Coles. Mr McLauchlan said that his price checks of Woolworths and Coles revealed that there were `very healthy margins and that perhaps we could go in there and make a statement about price and get a share of the business':

So we went in with a 35,000 square footer. I guess the mistake I made was making a big noise about how much cheaper we were going to be than Coles and Woolworths. We applied what was a normal retail margin in an Adelaide metropolitan store but with a freight component added in. We thought, `We know we can run a business on these costs and that at that margin we will make a dollar'. We found that that was substantially cheaper than Coles and Woolworths, so we thought, `Here's an edge', and we really pushed it. Of course, what happened was that Coles and Woolworths overnight dropped their across-the-board pricing on every product in the store to a level that was equivalent to our cost price into the warehouse in Adelaide. [18]

6.22 Mr McLauchlan said that the store is now owned by Coles.

[/ QUOTE ]

What is this if not predatory pricing? I can only see significant consumer harm by these actions.

Another thing Australian supermarkets do is lock in with suppliers, including exclusive contracts with various classes of goods. They basically use their oligopoly power to distort both the supply and demand side of the equation, hurting suppliers, hurting local communities, and hurting competition through unscrupulous activities. Also note that this occurring in a large, diverse sector with low barriers to entry AND an oligopoly structure AND the presence of government watchdog with substantial powers to punish blatant offences. This is far from the most conducive environment to monopoly and predatory practices, yet they're happening to a significant degree. And similar thing was reported in the UK some years ago.

So, I find Borodog's assertion that predatory pricing is a myth, kind of bizarre. Common sense alone should tell that such business practices will occur and will work, at least in some markets and some classes of good.

[ QUOTE ]
I'd rather deal with minor supermarket monopolies than huge bureaucratic government monopolies that I have next to no ability to avoid.

[/ QUOTE ]
This is but one examples of the actions of unrestrained businesses, and was only in response to Borodog's nonsense assertions about predatory pricing. This is far from the most significant example of how markets can and are distorted by the powerful to the detriment of all.

[TomCollins]

[ QUOTE ]
[ QUOTE ]
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 ]

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.

[tomdemaine]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
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 ]

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.

[/ QUOTE ]

Governmental restrictions on airspace and airport land?

[TomCollins]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
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 ]

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.

[/ QUOTE ]

Governmental restrictions on airspace and airport land?

[/ QUOTE ]

There are plenty of extra gates available in the old terminals. So this is definitely not the reason why. It used to be open with Northwest and a few other airlines going in there. Now it is office space.

[pvn]

[ QUOTE ]
http://www.aph.gov.au/senate/committ...report/c06.htm
[ QUOTE ]
6.21 In 1993, South Australian retailer, Mr Mark McLauchlan, saw an opportunity in Alice Springs to open an independent store in competition with Woolworths and Coles. Mr McLauchlan said that his price checks of Woolworths and Coles revealed that there were `very healthy margins and that perhaps we could go in there and make a statement about price and get a share of the business':

So we went in with a 35,000 square footer. I guess the mistake I made was making a big noise about how much cheaper we were going to be than Coles and Woolworths. We applied what was a normal retail margin in an Adelaide metropolitan store but with a freight component added in. We thought, `We know we can run a business on these costs and that at that margin we will make a dollar'. We found that that was substantially cheaper than Coles and Woolworths, so we thought, `Here's an edge', and we really pushed it. Of course, what happened was that Coles and Woolworths overnight dropped their across-the-board pricing on every product in the store to a level that was equivalent to our cost price into the warehouse in Adelaide. [18]

6.22 Mr McLauchlan said that the store is now owned by Coles.

[/ QUOTE ]

What is this if not predatory pricing? I can only see significant consumer harm by these actions.

[/ QUOTE ]

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?