Just trying to clarify your good post. I think that “create barriers to entry” is an important idea we really should avoid but sometimes it happens for other reasons. I mean, I don’t think all zoning laws are there just to give the local monopoly a local monopoly, it is an unintended side-effect. And I think the kinds of things we see in phones, for instance, a “rented medium of transmission” kind of thing, are a response to this kind of accidental barrier. But an accidental barrier isn’t any less of a barrier and we should, as you say, try to ameliorate the situation.
The word monopoly has a meaning, that is generally recognized within the study of economics. If you don’t want to use that word, pick a different one. Perhaps what you meant was oligopoly, where a few big players dominate.
What you guys don’t realize is that to achieve 100% market dominance is extremely difficult. More and more resources are required. Using the Walmart example, let’s say they drop their prices to drive out competitors, and succeed in destroying all the little mom and pop stores. They’ve been running at a loss, and now are vulnerable to companies like Target that can simply wait for the right time, then open their own shop and prevent Walmart from raising their prices.
I saw a couple of Cheetahs take down a gazelle a few months ago. Those are incredibly specialized animals that can dominate using speed. But after the kill, they’re wiped out and frequently lose their prey to the hyenas that simply wait them out.
Yes. And how is Vale supposed to stop every single person with iron from selling it.
It doesn’t matter. The point is that market dominance is fleeting. A decade ago this thread would have focused heavily on Microsoft, Starbucks, and Walmart. Those companies aren’t dominant any more. The computing world changed rapidly and MS couldn’t keep up; it wasn’t the government that stopped it. Now Google is the big man on campus, but for how long?
Note that you needed to use the word virtually. It wasn’t that long ago that whale oil was a big deal. And we haven’t been using petroleum for that long. The only reason we continue to use it is because it’s still so cheap. If Exxon had 100% control, raising the price only speeds up the transition. And like I said, how much power will they have after people stop using oil?
No, not at all, in fact it is exactly the same issue. Who cares if it’s a company that controls the oil or a country? Not that long ago the various empires were sailing around the world trying to control resources, none of them were ever successful, and most empires fell as a result. What makes you think a company wouldn’t do any better?
Exactly, and to remain the monopoly more and more resources will have to be spent making sure no one else manages to find another oil field. And when it runs out, then what?
Don’t be absurd. Legally a monopoly means dominant market power, not 100% of the market. When IBM was defending itself it did not point to the very existence of the BUNCH as a defense, and Microsoft did not claim that the existence of alternatives (even if few used them) meant that they did not have a monopoly.
As a former Bell System person, I can tell you that we lived by regulation. You might remember the famous Long Lines control room in New Jersey - the one with the map showing network traffic? That place was designed to be fancy enough to be impressive but not too fancy to make the regulators think that the prices were too high since we could afford luxury.
Can’t watch the clip at work, but in 2009 the market crash closed the income gap somewhat, since the rich had more money in the market than the poor. Given that the Obama Stock Market has doubled in value since then, I suspect this is no longer true.
Perhaps the conservative method of closing the income gap is to destroy the economy?
What’s absurd is that you and about a half dozen other people here don’t know what monopoly means.
Cite.
Of course not, because that would have been absurd. MS wasn’t charged with “being a monopoly.” The government was perfectly fine with MS having 90% market share, and continue to allow it today. The legal issue, since you don’t seem to understand, was that MS couldn’t use it’s perfectly legal dominance in the operating system market to influence prices/limit supply for web browsers. But now 10 years later, long after everyone has forgotten Netscape Navigator, IE only has about 25-30% usage for web browsers thanks to Chrome and Firefox. Bothb IE and Netscape suffered the same problem: they sucked and no one wanted to use them.
What you also don’t seem to understand is that a company doesn’t have to be a dominant player to be subject to those rules. The DOJ is currently going after Apple for antitrust violations.
What is market power? Power means the ability to compel compliance. Nike would like me to buy their shoes, I do not want to buy their shoes and so I have never bought a pair. There is literally nothing they can legally do to compel me to purchase their shoes. The fact that they sell more shoes than their competitors does not give them power in any real sense. The people with the power are the consumers. Conflating market share with power is trying to obsfucate the issue.
All businesses would like their competition barred from entry into the market. That is why governement regulatory power is great for large businesses. If a regulation adds cost, the larger the business the less it affects them since they can amortize the cost over a much larger volume of sales. For example, consider a regulation that costs all businesses in a segment 10,000 dollars. A large business that sells 10,000 units will have to raise its prices one dollar a unit. A small business that sells 1,000 units will have to raise its prices 10 dollars a unit. Thus the large business has just been given a huge advantage.
Remeber the kerfuffle a couple of years ago about toys made in China having lead paint? Mattell had to recall millions of toys. This caused a small boom in toys made by small manufacturers in the US. The government passed a law requiring every toy manufacturer to certify its toys were lead free with a third party. Mattel was able to do this in China for a fraction of what small toy manufacturers in the US had to pay. Thus regulations gave the big company a large advantage over the small companies.
So if Microsoft told PC mfg’s that they couldn’t license DOS/Windows at all if they sold computers with other OS’s (which would effectively stop 95% of their revenues) - you wouldn’t consider that “power” that is effective at reducing competition?
No, I would not because the manufacturing companies are free to take the deal or leave it. Microsoft has had competitors, Apple, IBM, Linux, but because of network effects its products are more useful than its competitors. The vast majority of products do not have network effects. However even with network effects the attempts to dominate the browser market failed when better competitors emerged. This despite Microsoft being the biggest and richest company. Would you bet that Microsoft still dominates Operating Systems in 20 years?
I understand your economics definition, but it is so narrow as to be useless, since there is no appreciable difference economically between 100% market domination and 99.9% market domination. The Wiki entry for monopoly has both definitions.
That is why I said dominant market power, not market share. Nike doesn’t have dominant market power. Having a large market share does not automatically mean you have dominant market power; sometimes you have to exercise it. Intel has a dominant market share, for perfectly legitimate reasons. However they used this power, according to reports, to force some customers to not purchase AMD processors through use of “marketing” payments. If Intel shuttered their fabs today AMD would not have enough capacity to move in to meet the demand.
Microsoft’s monopoly was not only Windows licenses. It was the ability to force PC makers to buy Windows even if they did not wish to install it on their computers. It was forcing them to not load Netscape back when downloading new software was a lot more challenging for the average person than today. It was hiding interfaces and breaking the software of others.
Regulation has nothing to do with this. If they are legitimate, they are a cost of doing business. Small companies can kill consumers just as easily as big ones, after all. And a large company has no more trouble complying than a giant one.
Lenny Bruce covered this back in 1961. He said you couldn’t do anything about AT&T or you’d be like a schmuck with two Dixie cups and a string going “hello, hello!” That’s dominant market power.
IE 3 dominated the marketplace even though it was a piece of crap, unimproved for years, and much worse than Netscape. Back then use of IE3 was inversely proportional to knowledge of computers, except for poor people whose PHBs mandated it.
As for 10 years from now, what market segment are you talking about? PCs, laptops - Microsoft will be just as dominant. Monopolies in one market don’t necessarily carry into others
The reason Microsoft lost its browser dominance had nothing to do with regulations. The government tried to force Microsoft to treat Netscape equally to IE. Netscape went out of business, it was not until the market found products it like better, FireFox and Chrome, that IE stopped being dominant. According to the OP that is impossible. Microsoft has tried to dominate MP3 players, video games, smart phone operating systems, and search engines yet it has not succeeded despite being huge and rich.
Part of it is because the nature of a big company is that is does something well that makes it wildly succesful. When the market changes they do not want to change because they do not want to mess with what has already worked. Small companies have to change, adapt, and try new things. That is why Apple is now worth more than Microsoft, and why Walmart is worth more than KMart.
Well, internet explorer is built into the Windows OS. If one has a Windows OS, one cannot choose to forego it. Nor did market forces explicitly lead to the creation of Firefox as it is free software. Implicitly, the fact that internet explorer did not perform sufficiently contributed to its design.
What part of different market segments aren’t you getting? Microsoft could use the profits from its monopoly-like position in the OS space to subsidize its game business.
I looked up browser market share, and have gotten some wildly different numbers, but none of them show that IE is as dominant as it used to be. But 10 years ago and more lots of users were petrified of downloading software (I know, I’ve done it for a lot of people) so the barrier to entry for a non-MS browser was much higher. At one point Netscape was far superior to IE, but it got starved for money, so it did fall until it donated its code to Mozilla. I’ve used them all - I go back to Mosaic and even Archie and Veronica.
I agree that small companies are more flexible than big ones - I wonder why you call Apple and WalMart small. WalMart has been having problems recently, but the example of Apple shows that even giant companies can be flexible - at least if run by a genius. But isn’t it a good thing to help small companies get their innovations to market without the risk of being squashed by big ones? As for examples of big companies being stupid and inefficient - I worked closely with people in the AT&T Computer Division, and I’ve got tons.
Killing competitors happens different ways. When I studied economics under Dr. Hans Sennholz, http://search.yahoo.com/r/_ylt=A0oG7pgghH9PrhgAPT9jmolQ;_ylu=X3oDMTByamlqaW9mBHNlYwNzcgRwb3MDMwRjb2xvA2FjMgR2dGlkAw--/SIG=11fjv7c59/EXP=1333785760/**http%3A//mises.org/about/3246 he talked about efficiency monopolies. Companies that provided such value, other couldn’t compete. He hated monopolies depending on government restriction of market entry. He loved the story of Sun Oil Company* that when excluded or faced excessive charges by the pipeline monopolies, developed the oil tanker. He was a great lover of technology. He would have loved to have heard of my escape from the clutches of the Grace Fergerson Screen Door, Airline, and Phone Company by switching to Vonage.
Another way of controlling your competition is to shackle them with regulations in the name of protecting the public. Large companies can much better afford the lawyers and accountants to comply with the regulations.
*Yes he had a cozy relationship with Sun Oil. I also enjoyed low tuition thanks to them.
Completely and utterly wrong.
If a market is functioning well, a buyer and seller come together willingly, exchange a good and/or service for an agreed-upon price, and both walk away satisfied.
That’s it.
Of course they could take it or leave - all deals have that attribute. That doesn’t rebut in any way that MS used market dominance to reduce competition.
What did MS do with those deals? They prevented competing OS’s on almost all x86 PC’s.
How was MS able to make those deals? Because they dominated the market and thus had power or leverage in their negotiations with the mfg’s. They knew that to be locked out of the DOS/Win marketplace for PC’s would either shutdown the company or the division (depending on which company we are talking about).
Fine. The OP doesn’t use the word “monopoly” anyway, so this was a tangent.
As I said, I think the word “monopoly”, under this economics definition, is useless in discussing real world systems.
It’s rather like using a strict mathematical definition of sphere, then declaring that there are no spheres in the universe. You’d be technically right (we think), but plenty of times we need to approximate spheres in the real world.
I meant that oil peaking is nothing to do with market dominance but because it is a finite resource. If there were a million small companies selling oil, it would still run out, assuming the same demand.
If they were the only company selling shoes they could not compel you to buy their shoes – you could still go barefoot.
Market dominance =/= jedi mind powers.
10 years ago Microsoft dominated the browser market for reasons you articulate. If Capitalism inevitably leads to monopolies then they should still be dominant, but capitalism inevitably does not lead to monopolies so they are not. Browsers and operating systems should lead to monopolies because of network effects, but they do not because innovation and making the consumer happy are even stronger than network effects. That is what capitalism is about, service to one’s fellow man. Companies that serve their customers best grow, and companies that serve their customers poorly or inefficiently shrink.
Apple and Walmart were small once but they were better at serving their customers so they became huge. Their competitors tried to kill them, but they were unable because they were better than their competitors. Capitalism is survival of the fittest, not survival of the biggest.