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When discussing the issue of monopolies how does one deal with the issue of entrance costs? In a free market it is said that if a monopoly fails to stay competitive new competitors will spring up and either force the monopoly to compete, or destroy it. What about businesses where, when all other competitors have been bought out or out competed, the entrance costs to ever compete with the monopoly is astronomically high? How will new comers have enough capital to compete with established monopolies who start to provide an inferior service?

Edited by oso
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Can a monopoly develop in an actually free market? What definition of monopoly permits competitors? Capitalism qua free market functions properly only with an educated and skeptical market. Inducing from - oops, lunch is on, more later.

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This isn't really my area, but to the best of my knowledge, if an entrepreneur wants to enter a field in which there currently exists a monopoly and there are high start up costs, he has two options: earn the required funds in some other field and then expand into the new business, or seek out investors. Can you think of any reasonable case where neither of these is an option?

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Consider the worst case. What is so awful about a non-coercive monopoly that has beaten the market by some combination of efficiency and popularity? So what if there is some room to increases prices or reduce quality before competition becomes viable again? Just where is the tragedy or outrageous miscarriage of justice here?

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Consider the worst case. What is so awful about a non-coercive monopoly that has beaten the market by some combination of efficiency and popularity? So what if there is some room to increases prices or reduce quality before competition becomes viable again? Just where is the tragedy or outrageous miscarriage of justice here?

(sorry no caps)

exactly! in that worst case the moment the, shall we call, fair monopoly abuses its position, it ceases to be that popular opening room for new competitors.

the other thing that can happen, which renders good results, is that when the entry costs of industries in general becomes prohibitive to "the little guy", new more ephemeral industries are created (like light manufacturing being more in private and plural hands than heavy "nationally essential" industries). another example of this is the artist, writers, entertainers, and most specifically internet entrepreneurs. When most railroads in the usa were under public/private monopolies a certain someone began mass producing automobiles.

the only "industry" that has a prohibitive entry cost for even the wealthiest of private individuals is government. (see mark thatcher and his failed coup of equatorial guinea - or "prince roy of sealand" and his semi sovereign "country". Of course that's a whole other argument.

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When discussing the issue of monopolies how does one deal with the issue of entrance costs? In a free market it is said that if a monopoly fails to stay competitive new competitors will spring up and either force the monopoly to compete, or destroy it. What about businesses where, when all other competitors have been bought out or out competed, the entrance costs to ever compete with the monopoly is astronomically high? How will new comers have enough capital to compete with established monopolies who start to provide an inferior service?

How about partner with a large provider of capital who isn't already in the market and wants a share?

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When discussing the issue of monopolies how does one deal with the issue of entrance costs? In a free market it is said that if a monopoly fails to stay competitive new competitors will spring up and either force the monopoly to compete, or destroy it. What about businesses where, when all other competitors have been bought out or out competed, the entrance costs to ever compete with the monopoly is astronomically high? How will new comers have enough capital to compete with established monopolies who start to provide an inferior service?
Entrance costs can be a barrier to entry within a given context, but they're not insurmountable. Today, there is enough capital ready to go be deployed against any size of business if the chance of success is good. If there are no protectionist laws, size alone is rarely going to be a barrier to entry.

In today's context, the problem is mostly illusory. Can you list 5 businesses which are monopolies primarily because of high entrance costs?

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Every major car company or computer manufacturer, for one.

When we say "high entrance costs" in this context, we're talking about natural monopolies where the features of the business itself impose incredibly high costs on potential newcomers. The industries that you have cited a.) are not monopolized in the first place, and b.) to the extent that they are dominated by a few large firms, these firms maintain market share primarily through regulation levied against potential competitors, rather than costs inherent in production.

Edited by Dante
Fixed my 'b' so that it didn't appear as a smiley
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Every major car company or computer manufacturer, for one.
As Dante said, these aren't monopolies. More importantly, these are two industries where the profitable companies of one generation have been supplanted by those of the next. Two of the three U.S. car companies might not even exist today -- and definitely in their current form -- if the market had been allowed slightly more free-play than we have today (I'm not talking free-market here, just a refusal by Reagan to bail out Chrysler, followed by a refusal by Obama to bail out GM and Chrysler.

As for computers, when I started my career in 1986, none of today's big U.S. companies were around, except IBM. And, IBM has managed to survive at its size by doing things other than hardware. Today, Dell's hardware business is under seige and is they're trying to make money in services.

As for other businesses, the airlines are big, but mostly unprofitable. The airlines that actually make money are the smaller challengers, like Southwest and Alaska Airlines.

Once, US Steel seemed to own a business with extremely high capital investment requirements. If no new technology had come to fore, they'd still have probably lost most market share to the Koreans and others. As things turned out, the upstart Nucor killed USX via the mini-mill route.

There was a time when people thought KMart was unbeatable in certain states. Kmart executives thought it not worth their time to bother with Walmart. Also... Sears and Montgomery Ward .

GE is the only Dow Jones 30 company still in the Dow, and that is because they're one of the few that managed to stay relatively agile for a company their size.

Edited by softwareNerd
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When we say "high entrance costs" in this context, we're talking about natural monopolies where the features of the business itself impose incredibly high costs on potential newcomers. The industries that you have cited a.) are not monopolized in the first place, and b.) to the extent that they are dominated by a few large firms, these firms maintain market share primarily through regulation levied against potential competitors, rather than costs inherent in production.

I'm not really seeing that in the absence of proof of the specific regulations you're talking about. And if these regulations create the monopoly, why are car and computer manufacturers monopolies not just in their host country but around the world? How are new companies supposed to cope with the huge advertising, R&D, and economies of scale setup costs of creating a new competitive brand of car? And why were there regulator antitrust suits against Microsoft and Dell, are those all just pretend?

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When discussing the issue of monopolies how does one deal with the issue of entrance costs? In a free market it is said that if a monopoly fails to stay competitive new competitors will spring up and either force the monopoly to compete, or destroy it. What about businesses where, when all other competitors have been bought out or out competed, the entrance costs to ever compete with the monopoly is astronomically high? How will new comers have enough capital to compete with established monopolies who start to provide an inferior service?

In a hypothetical, you get to postulate the assumptions, and conclusions necessarily follow. In geometry, if I say there is a line intersecting another line and forming this angle, then ask what is the other angle, then it necessarily follows what the conclusion is. So what if there is a single-seller and start-up costs are astronomically high? Then there is a single-seller and start-up costs are astronomically high. It will be hard for smaller firms to enter the market. The single existing firm will charge relatively higher prices then.

I know there are "prefect competition" models, but these are entirely arbitrary, stemming from the neoclassical economists' spurious conception of competition, and the Marxian dogma of the "law of the centralization of capital." The proper size and number of firms in an industry cannot be determined in advance. We can't say a priori "there must be X number of firms of Y size, or else it's market failure!" Who is to say that two smaller firms are suboptimal and one larger firm is not optimal then? Only the test of profit and loss through the price mechanism can determine the best use of resources, which means that ultimately the consumers in their buying and non-buying determine how many firms should be operating, and what arrangement of capital is superior from their point of view.

In the real world, astronomically high entrance costs must be astronomically high for a reason, they are not preordained to be astronomical or high. If some industry required an astronomically expensive amount of capital to produce some good, that means prices will be relatively high anyway because costs of production are high. Thus it might be better for smaller firms to merge into one giant firm, and then entrance costs will still be high for other smaller firms looking to get started. They might need to pool together an astronomical sum and start an even bigger firm in order to compete at lower costs (why must it be assumed that a small firm should have to be on an equal footing as a large firm in order for it to be called "competition"?), and will only undertake this if profits are high enough, i.e. if the high prices are not entirely correlated with the high costs of production. Even if this is the case, it means that the large single-seller is still being subjected to competition, so long as free entry is maintained. (Cf. Rand ed. Capitalism: The Unknown Ideal, chapter 4, "Antitrust" especially pp. 68-69. Cf. Also Rothbard Man Economy and State, chapter 10, "Monopoly and Competition" p. 629, especially section 5, "The Theory of Monopolistic or Imperfect Competition" p. 720.)

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... why are car and computer manufacturers monopolies not just in their host country but around the world?
Car companies? You must be talking Greek here. If car companies are a monopoly, a buyer should have no choice of which company to buy from. Are you aware of how many car companies sell cars to the U.S. consumer?

As for computer companies like Dell... that's an even bigger joke... buying a PC, you have a whole lot of options on the internet, and you can even build one yourself readily enough.

Edited by softwareNerd
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Car companies? You must be talking Greek here. If car companies are a monopoly, a buyer should have no choice of which company to buy from. Are you aware of how many car companies sell cars to the U.S. consumer?

We're not on the same page here. You seem to be thinking according to the boardgame definition, "monopoly" meaning only one company in the world selling something. The formal economic definition simply refers to a market where a firm has room to be a price maker rather than a price taker. These are two ends of a spectrum not practical absolutes. Typically depending on the sector, a sector of the economy with less than about 100 firms is considered to be in monopolistic competition.

http://en.wikipedia.org/wiki/Monopolistic_competition#Many_firms

An oligopoly is an even less competitive situation where only a few firms dominate the market; perhaps less than ten.

As for computer companies like Dell... that's an even bigger joke... buying a PC, you have a whole lot of options on the internet, and you can even build one yourself readily enough.

You can do that but the personal computers you buy on the market are almost certainly going to be made by one of the eight big personal computer firms. As for individual hardware components like video cards or routers there are generally very few firms dominating those sectors as well. Lots of R&D and branding, high entrance costs.

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We're not on the same page here. You seem to be thinking according to the boardgame definition, "monopoly" meaning only one company in the world selling something. The formal economic definition simply refers to a market where a firm has room to be a price maker rather than a price taker. These are two ends of a spectrum not practical absolutes. Typically depending on the sector, a sector of the economy with less than about 100 firms is considered to be in monopolistic competition.

http://en.wikipedia.org/wiki/Monopolistic_competition#Many_firms

An oligopoly is an even less competitive situation where only a few firms dominate the market; perhaps less than ten.

You can do that but the personal computers you buy on the market are almost certainly going to be made by one of the eight big personal computer firms. As for individual hardware components like video cards or routers there are generally very few firms dominating those sectors as well. Lots of R&D and branding, high entrance costs.

You are describing a form of corporatism, reminiscent of the big Korean industrial giants, or of the pre war Japanese Zaibatsu, basically the industrialized version of a tribe. True, we live in a mostly corporativist, tribalist, world, but if your assumption of few companies controlling all markets, then why are we seeing more, not less, car companies in more countries, like India for instance.

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We're not on the same page here. You seem to be thinking according to the boardgame definition, "monopoly" meaning only one company in the world selling something. The formal economic definition simply refers to a market where a firm has room to be a price maker rather than a price taker. These are two ends of a spectrum not practical absolutes. Typically depending on the sector, a sector of the economy with less than about 100 firms is considered to be in monopolistic competition.
If you read up a bit more on this, you'll find that "monopoly" is not synonymous with "monopolistic".

Anyhow, so you're talking about so-called "monopolistic markets" and not about monopolies. Well, the underlying notion of "perfect competition" is a rationalistic mind game rather than something related to reality. Those who propounded that model-of-the-mind as being some type of ideal have no notion of the actual source of wealth. Implicitly, they buy into a materialistic viewpoint, which they (ironically) share with the Marxians. They do not understand that wealth is primarily driven by knowledge and behavior, not by material processes -- those are secondary to the former. Having glossed over this essence of wealth-production, they then reduce all people to some model-average. Added to this, they ignore the essential nature of man's consciousness: that man is not omniscient. They think that hungry man gets value when he eats, and they're even willing to count as value the services of the guy who delivers the food. Yet, they insist that the knowledge that the food is available, the knowledge about the quality of the food ,and so on, are not economic values. So, when Dell assemble a computer, it is value, when they send it to the customer it is value, but when Dell tells a customer about it, these economists reject that as not being a value.

Schumpeter called this economic model "Hamlet without the Prince". The model best belongs in some type of sci-fi book, and has no relevance to the real world. All it gives us is absurdities like "Strong Efficient Market Theory".

The payoff behind the "perfect competition" model is that it pushes an egalitarian ideal. Once we "assume away" entrepreneurship and knowledge as being relatively unimportant, we're left with this notion that people are more equal, followed by the notion that they all deserve to get similar values. Happily, government then picks up on this idea and uses it to undermine and reverse the very meaning of freedom. So, if two people are interacting without actual force, the government now has a justification for coming in and insisting that one of them is really not free, and may not interact that way.

All of which is a way of saying this: far from being some disruption of the ideal state, so-called "monopolistic competition" is the norm and is ideal in the real world.

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All of which is a way of saying this: far from being some disruption of the ideal state, so-called "monopolistic competition" is the norm and is ideal in the real world.

There are plenty of sectors that are not in perfect competition. Agricultural staples are a good example, even in the presence of government distortions. So if "monopolistic competition is ideal", should a government encourage monopolistic competition?

The rest of your post gives reasons why monopolies may not be a bad thing, which I don't generally agree with and can give my reasons if you ask, but I haven't seen a compelling argument against the OP's apparent proposition that high entrance costs can result in monopolistic competition.

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There are plenty of sectors that are not in perfect competition. Agricultural staples are a good example, even in the presence of government distortions. So if "monopolistic competition is ideal", should a government encourage monopolistic competition?
I reckon you meant to cite agriculture as an industry that is in perfect competition. By definition, an industry that produces something that is easy for anyone else to replicate (i.e. a commodity) is not monopolistic, and everyone else is monopolistic to the extent to which it is non-trivial for someone else to produce a similar product. I definitely do not want to go back to the age where most of my money would be spent on commodities. I love the many non-commodity values produced by modern economies. No, I do not think the government should encourage anyone to produce anything more than just commodities; not in a positive sense. All i want is for the government to keep out of my way and let me buy all the cool stuff I want from all the cool folks who make that stuff.

The rest of your post gives reasons why monopolies may not be a bad thing, which I don't generally agree with and can give my reasons if you ask,...
Actually, that was not the primary thrust of my post. My main point was that the whole model of "perfect economy" is a flawed one. The economists take a specific type of market and make that into a general theory. It is flawed because that specific case is just that: specific. Further, the instances become less prevalent with every decade of human thinking, progress and diversity. Analogous would be for a vet to say "I like cats, therefore I'm going to treat every dog like a cat and spend all my effort trying to make every dog as cat-like as possible".

... but I haven't seen a compelling argument against the OP's apparent proposition that high entrance costs can result in monopolistic competition.
Here's the thing: if you define "high entrance costs" to mean that I cannot start an airline if I rely on my own net worth, then the point is trivial and insignificant. If the whole proof relies on "there are N companies" in a market, then the question can simply be phrased that way. If we are to make any sense of the question, and consider it significant we must interpret to ask the following: if someone has a technique to compete against a large company and only lacks the capital, will capital be forthcoming. Today, the answer is "yes".

In a over-simplified model modern economy, if Company X has the ability to earn more than the "market rate" on capital deployed, the value of the company will immediately rise to account for this, thus reducing the rate of earning back to the market rate. In other words, any advantages are in the past, and not durable.

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Financial barriers to entry will be a non-issue under laissez-faire, and to an extent already ARE a non-issue today. If you can prove that you have an idea for a bette product or a more efficient way of making an existing product then you can get all the funding you need from the financial sector. Billions of dollars worth of finance can be and ARE arranged in just months. This is precisely what happened in the early-mid 80's, and for which the Old Guard in the corporate world and the unions hated Michael Milken with a passion. Laws were passed to try to prevent this happening again (takeovers by formerly bit players), such as requiring at least 50% of funding for a take-over be funded by equity rather than debt. It is immoral laws like that which hinder competition by creating financial barriers, not "natural monopolies."

JJM

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I reckon you meant to cite agriculture as an industry that is in perfect competition.

Yes. I can't see the edit post button for some reason.

By definition, an industry that produces something that is easy for anyone else to replicate (i.e. a commodity) is not monopolistic, and everyone else is monopolistic to the extent to which it is non-trivial for someone else to produce a similar product. I definitely do not want to go back to the age where most of my money would be spent on commodities. I love the many non-commodity values produced by modern economies. No, I do not think the government should encourage anyone to produce anything more than just commodities; not in a positive sense. All i want is for the government to keep out of my way and let me buy all the cool stuff I want from all the cool folks who make that stuff.

Okay. No problem there. Just want to understand your economics argument.

Actually, that was not the primary thrust of my post. My main point was that the whole model of "perfect economy" is a flawed one. The economists take a specific type of market and make that into a general theory. It is flawed because that specific case is just that: specific. Further, the instances become less prevalent with every decade of human thinking, progress and diversity. Analogous would be for a vet to say "I like cats, therefore I'm going to treat every dog like a cat and spend all my effort trying to make every dog as cat-like as possible".

Here's the thing: if you define "high entrance costs" to mean that I cannot start an airline if I rely on my own net worth, then the point is trivial and insignificant. If the whole proof relies on "there are N companies" in a market, then the question can simply be phrased that way. If we are to make any sense of the question, and consider it significant we must interpret to ask the following: if someone has a technique to compete against a large company and only lacks the capital, will capital be forthcoming. Today, the answer is "yes".

In a over-simplified model modern economy, if Company X has the ability to earn more than the "market rate" on capital deployed, the value of the company will immediately rise to account for this, thus reducing the rate of earning back to the market rate. In other words, any advantages are in the past, and not durable.

I'm confused here. I'm not aware that "rate of earning" is a technical term. What do you mean by that?

Anyway, one of the main problems with a monopoly is that companies have reduced incentive to invest in innovation due to lack of competition. Product quality doesn't matter as much when you're the only one making widgets. Not to advocate any particular government intervention that could accomplish that without creating bigger problems. Just saying this does happen, and leads to monopolistically competitive firms investing in new product design at a reduced rate or designing products that are incompatible with competitors', in a way that's best for the firm but not necessarily for economy wide innovation. To present an example: Microsoft designing APIs to favor its own browser over others.

What really becomes a problem is when firms engage in cartelization and price-fixing. It's hard to say there's some kind of economic benefit from all the major companies in a sector agreeing to charge more for the their products. The result is an economic profit for the monopolies or oligopolies and higher price for buyers. When these monopolies produce some kind of capital, increased capital costs effectively reduce economy wide investment and innovation. Example: The DRAM industry before 2002.

Financial barriers to entry will be a non-issue under laissez-faire, and to an extent already ARE a non-issue today.

I can see one or two new companies garnering a few billion in capital to take on Microsoft, if they have a really whiz-bang ideas. There's still never going to be enough capital going around to create hundreds of Microsoft challengers and create as high a level of competition in the PC industry as there is in, say, agriculture.

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I'm confused here. I'm not aware that "rate of earning" is a technical term.
Earning=profit. Rate when expressed as a numerator, using Capital as the denominator. Rate of return on Capital/Investment.

Anyway, one of the main problems with a monopoly is that companies have reduced incentive to invest in innovation due to lack of competition. Product quality doesn't matter as much when you're the only one making widgets. Not to advocate any particular government intervention that could accomplish that without creating bigger problems. Just saying this does happen, and leads to monopolistically competitive firms investing in new product design at a reduced rate or designing products that are incompatible with competitors', in a way that's best for the firm but not necessarily for economy wide innovation. To present an example: Microsoft designing APIs to favor its own browser over others.
Well, the facts of reality contradict your model. It "does happen", of course, but those companies do not last long. The problem with the typical over-simplified economics model is that they assume cause and effect are some type of instantaneous reaction, once again ignoring the nature of the human mind, human evaluative process, and the (good) attribute of human beings to use principle rather than going from one-off experience. Microsoft kept its position for many years primarily by offering value. Their attempts to gain some advantage simply for being Microsoft were not durable.

Here's the problem: the executives who work at Microsoft graduated from the same universities as most others and learnt many of he wrong lessons. Obviously, there are many Microsoft executives who would agree with your theory of monopolistic competition. So, seeing that they were now in a company that they believed was close to a monopoly, they chose to act on the economic lessons they were taught. According to their theory, they were being villains, to give Microsoft an advantage. Ironically, it is this that helped other companies take the lead. The complaints about the advantages Microsoft gains from keeping its APIs to itself in the early stages are mostly bogus. Again, do not simply take your theory as a starting point and try to rationalize where it will lead: instead, look at reality. For all its API secrets, fior years Microsoft had the slowest browser, and not just by some small degree, but slow as a snail.

What really becomes a problem is when firms engage in cartelization and price-fixing. It's hard to say there's some kind of economic benefit from all the major companies in a sector agreeing to charge more for the their products. The result is an economic profit for the monopolies or oligopolies and higher price for buyers. When these monopolies produce some kind of capital, increased capital costs effectively reduce economy wide investment and innovation. Example: The DRAM industry before 2002.
Once again, cartels rarely manage to exact a durable advantage. Just because some people form a cartel and set a price does not imply that they do so in their best long-term interests.

I can see one or two new companies garnering a few billion in capital to take on Microsoft, if they have a really whiz-bang ideas. There's still never going to be enough capital going around to create hundreds of Microsoft challengers and create as high a level of competition in the PC industry as there is in, say, agriculture.
No, there is no shortage of capital in the world. We have had unpteen examples of capital flowing to the most crazy ideas and upstarts, on the chance that some may pay off.
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Earning=profit. Rate when expressed as a numerator, using Capital as the denominator. Rate of return on Capital/Investment.

Well, the facts of reality contradict your model. It "does happen", of course, but those companies do not last long. The problem with the typical over-simplified economics model is that they assume cause and effect are some type of instantaneous reaction, once again ignoring the nature of the human mind, human evaluative process, and the (good) attribute of human beings to use principle rather than going from one-off experience. Microsoft kept its position for many years primarily by offering value. Their attempts to gain some advantage simply for being Microsoft were not durable.

Really? I think if there was adequate competition in the OS market there would be a faster and less buggy 64 bit OS out there that ran games other than Vista or 7. But to each his own.

Here's the problem: the executives who work at Microsoft graduated from the same universities as most others and learnt many of he wrong lessons. Obviously, there are many Microsoft executives who would agree with your theory of monopolistic competition. So, seeing that they were now in a company that they believed was close to a monopoly, they chose to act on the economic lessons they were taught. According to their theory, they were being villains, to give Microsoft an advantage. Ironically, it is this that helped other companies take the lead. The complaints about the advantages Microsoft gains from keeping its APIs to itself in the early stages are mostly bogus. Again, do not simply take your theory as a starting point and try to rationalize where it will lead: instead, look at reality. For all its API secrets, for years Microsoft had the slowest browser, and not just by some small degree, but slow as a snail.

Oh yeah, it was always a POS browser. Exactly because they were a monopoly Microsoft didn't need to bother to produce a competitive one thanks to bundled software. Neither IE nor Microsoft's other products are of particularly stellar quality, but often you pretty much have to buy these products to stay compatible. I would use Linux if only games were made to run on it.

Once again, cartels rarely manage to exact a durable advantage. Just because some people form a cartel and set a price does not imply that they do so in their best long-term interests.

"Rarely"? Sure, but there are cartels out there which last for years. Cartels like the DRAM one often last until regulators bust them. How does letting cartelization and price fixing go on help the economy?

No, there is no shortage of capital in the world. We have had unpteen examples of capital flowing to the most crazy ideas and upstarts, on the chance that some may pay off.

Saying there is no shortage is a strong word; it would cost hundreds of billions to create enough PC companies to make this market competitive. Sometimes monopolies, market failure, and destructive self interest are a fact of life.

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Really? I think if there was adequate competition in the OS market there would be a faster and less buggy 64 bit OS out there that ran games other than Vista or 7. But to each his own.
Microsoft did not keep its position in the OS world because of a lack of capital to go against it, nor does it keep its position today because of a lack of capital to go against it. There are some products where customers seek standardization, they seek the product that other people seek. The presence of a single dominant OS has meant a huge cost saving across the software industry and for buyers of software. There was a time when a company producing an accounting package had to make a version for IBM, another for Bull, another for Unisys, another for Vax, another for Wang, another for Hitachi, and so on. The primary reason Unix began to become popular on mid-range systems is that the flavors were fairly similar. the fact that Unix was free got it into colleges and that produced graduates who were familiar with it. However, the fact that it was also a negative for Unix because entrepreneurs often did not see a way to push it as a platform while showing some distinctive competitive advantage. Some economists would have us believe that a distinctive competitive advantage is a bad thing, but it is the only means of progress and innovation. You might not like the cost-saving product, just like many people pooh-pooh WalMart, but their existence is based on the huge cost-saving they pass on to their customers: the same with Microsoft.

Oh yeah, it was always a POS browser. Exactly because they were a monopoly Microsoft didn't need to bother to produce a competitive one thanks to bundled software. Neither IE nor Microsoft's other products are of particularly stellar quality, but often you pretty much have to buy these products to stay compatible. I would use Linux if only games were made to run on it.
Do you really think that Microsoft's badly performing browser was a good thing for Microsoft? I already said in my previous post that there were executives at Microsoft who believed the same theory that you do, and decided to rest on their laurels. This hurt them.

"Rarely"? Sure, but there are cartels out there which last for years. Cartels like the DRAM one often last until regulators bust them. How does letting cartelization and price fixing go on help the economy?
I'm not familiar with the DRAM market, but I did say that people try to fix prices. it rarely lasts, and it seldom serves the price-fixer well in the long term.

Saying there is no shortage is a strong word; it would cost hundreds of billions to create enough PC companies to make this market competitive.
Obviously if you insist that a market where nobody has any ability to compete is "perfect competition", you may not find such a market forthcoming.

Sometimes monopolies, market failure, and destructive self interest are a fact of life.
"...destructive self-interest" is usually not in one's self interest over the long run.
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Microsoft did not keep its position in the OS world because of a lack of capital to go against it, nor does it keep its position today because of a lack of capital to go against it. There are some products where customers seek standardization, they seek the product that other people seek. The presence of a single dominant OS has meant a huge cost saving across the software industry and for buyers of software. There was a time when a company producing an accounting package had to make a version for IBM, another for Bull, another for Unisys, another for Vax, another for Wang, another for Hitachi, and so on. The primary reason Unix began to become popular on mid-range systems is that the flavors were fairly similar. the fact that Unix was free got it into colleges and that produced graduates who were familiar with it. However, the fact that it was also a negative for Unix because entrepreneurs often did not see a way to push it as a platform while showing some distinctive competitive advantage. Some economists would have us believe that a distinctive competitive advantage is a bad thing, but it is the only means of progress and innovation. You might not like the cost-saving product, just like many people pooh-pooh WalMart, but their existence is based on the huge cost-saving they pass on to their customers: the same with Microsoft.

I wouldn't even call Wal Mart a monopoly due to the nature of the retail industry. However the fact that the most used applications won't run on anything besides Windows gives MS a huge advantage. It's incompatibility more than anything else that sank Unix; it was a decent OS in all respects besides the fact that people could not run the popular Windows-only apps on it. A colossal amount of capital would be needed to create several new companies able to develop a competitive brand strength and popularity. It's not merely a matter of designing an OS; you'd need all the advertising, supplier agreements and OS-specific apps that Microsoft has too to get people to buy your OS.

If you're arguing that this would eliminate all the cost savings of standardization and not be worth it in the end, I agree. However, standardization is a double edged sword and also means the company that makes the standard product faces little competition.

Do you really think that Microsoft's badly performing browser was a good thing for Microsoft? I already said in my previous post that there were executives at Microsoft who believed the same theory that you do, and decided to rest on their laurels. This hurt them.

It did, but how much so, considering it saved them development costs? They pursued their monopoly strategy and still have just as dominant a position in the computer market; there's more competition in browsers now perhaps but that would have happened eventually regardless. Acting as a monopoly could well have been worth it for them.

I'm not familiar with the DRAM market, but I did say that people try to fix prices. it rarely lasts, and it seldom serves the price-fixer well in the long term.

Price-fixers have little to lose in the long run; the worst that can happens is the cartel breaks up and they return to normal competition. The only bad thing that might happen to the firm to make price fixing not worthwhile is a regulator antitrust lawsuit. You also did not present an argument as to why the government should allow price fixing.

Obviously if you insist that a market where nobody has any ability to compete is "perfect competition", you may not find such a market forthcoming.

When did I say that? How would creating a hundred new PC companies create a "market where nobody has any ability to compete"?

"...destructive self-interest" is usually not in one's self interest over the long run.

I don't know about "usually". But in the DRAM market case among other examples what's best for the company isn't always best for innovation.

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