Economics: What a monopoly isn't.

[Speaker to Animals]

The idea that market share equals monopoly is demonstrably false. If I own the only shoe store in Topeka, Kansas, I’m not a monopoly - even if I have 100% of the Topeka shoe market. It’s not a monopoly because others can compete with me.

Think about it - any new, unique product would automatically be a monopoly upon release if market share determined monopolies.

“Brand new widget X goes on sale today”

“Quick, destroy that company. They have a monopoly on widget X markets!”

That’s not how it works.
It’s all about restricting competition.
Government can restrict new competitors from challenging Comcast, but Comcast can’t forbid start-ups from competing with them. To have a monopoly you need to suppress competitors and government is the tool of the suppression.

That's literally the definition of a monopoly, dude. A monopoly enjoys enough market share to be able to price competitors out and then adjust prices above efficient price once they control the whole thing. Monopoly. Textbook definition thereof.

[DBTrek]

Funny, I’m reading a textbook and it says marketshare is irrelevant to monopoly. Only thing that determines a monopoly is whether or not competitors can enter the marketplace.

[Speaker to Animals]

Funny, I’m reading a textbook and it says marketshare is irrelevant to monopoly. Only thing that determines a monopoly is whether or not competitors can enter the marketplace.

That's the same thing, dude. What triggers government action is creating barriers to entry. What makes it a monopoly is the market share. You cannot create barriers to entry without the market share (or government collusion in the racket).

The principal barrier to entry is flooding the market with cheap goods to drive competitors out of business. Then the monopoly drives up prices well above the efficient price. The only way you can get away with that is to control a very large portion of the market share.

[SuburbanFarmer]

If a monopoly has been achieved without an assist from the government I’d love to hear about it.

I’m sure those who disagree with me have countless examples.
So ... anytime they want to produce even one of them ...

I already provided 2 of them.

And if you’re going to get pedantic and define a monopoly as “an industry of one”, then there’s no point in discussing this.

[DBTrek]

The logic of “selling below price to starve competition” equating to a monopoly does not stand. It is neither a sustainable tactic, nor one that prevents other competitors from entering the market. A company can’t survive by losing money forever, which means profit-losing strategies are short term actions at best.

Apple can sell iPhones for $10 apiece if they want to try to run Samsung out of the market. But how long do you think they can sustain their current operations while losing $600 per iPhone?
Not long.

What we’re seeing here is folks equating anti-competitive tactics with “monopoly”, but the two aren’t synonyms.

[Speaker to Animals]

That literally is how we define monopolistic practices in college, DB.

[SuburbanFarmer]

The logic of “selling below price to starve competition” equating to a monopoly does not stand. It is neither a sustainable tactic, nor one that prevents other competitors from entering the market. A company can’t survive by losing money forever, which means profit-losing strategies are short term actions at best.

Apple can sell iPhones for $10 apiece if they want to try to run Samsung out of the market. But how long do you think they can sustain their current operations while losing $600 per iPhone?
Not long.

What we’re seeing here is folks equating anti-competitive tactics with “monopoly”, but the two aren’t synonyms.

When a single company controls a market, and the pricing of it, that is a monopoly. Walmart tells their suppliers what to expect, not the other way around. That is a competition-free model.

Walmart can and will continue to price competitors out of business, as they have done for decades. Once the competition is gone, prices go back up. It’s a very simple model.

Apple is operating on a “luxury goods” model. They don’t compete on pricing. Very different animal, and not a monopoly.

[DBTrek]

There’s only so many ways to demonstrate that you guys are wrong, and it seems a waste of time to repeat myself, but ok.

The first general store in Idaho wasn’t a monopoly, even though they controlled the prices and had 100% of the market (until general store # 2 opened)

The first creator of the smartphone wasn’t a monopoly, even though they had 100% of the smart phone market (until the second smart phone was created by a competitor).

/shrug

Examine your definitions, they’re flawed. The WalMart example is especially flawed as Walmart colludes with local government in anticompetitive ways and still isn’t a monopoly (as Target or KMart could tell you)

[Speaker to Animals]

I will stick with my professors who were actual economists rather than a guy who read Thomas Sowell for the first time last month.

[DBTrek]

That's fine.

Those same professors are all about breaking up "monopolies" like Google, Facebook, and Microsoft.
Because no one else runs a search engine, social media platform, or operating system, apparently.
"But they have so much market share, it's not FAIR!!!"

Of course, anti-monopoly laws have also been used to break up mergers between shoe companies that account for less than 7% of the US market, or two grocery chains merging to take less than 8% of the groceries in Los Angeles.

In 1966, the Supreme Court blocked a merger of two supermarket chains in Los Angeles that, had they been allowed to combine, would have controlled just 7.5 percent of the local market. (Today, by contrast there are nearly 40 metro areas in the U.S where Walmart controls half or more of all grocery sales.) Writing for the majority, Justice Harry Blackmun noted the long opposition of Congress and the Court to business combinations that restrained competition “by driving out of business the small dealers and worthy men.”

But as long as the academics are satisfied, I'm sure they know what they're doing.


I'll stick with Sowell.