[FishHooks]

I've also been wondering about his stance on this as well, but he told me natural monoplies can't happen when there is no govt regulation. While I wont attack him because I feel he knows more about economics than most people here I get your point and would like to know what he thinks about it.

I think a good example of no govt regulation would go back to the Industrial revioultion in america in the early 1900's with the railroad companies and with Rockafeller. There was hardly govt regulation at that time. He basically baught out every company he could, made deals with the railraod companies that if they wanted his business they had to charge his competitors more money than they were charging him. They agreed because his business was much more valuable because his company was much bigger. He became so powerful, and the railraod had to hike rates to individuals because of the rebates they were giving to rockafeller. At one point he made the railroad companies pay him like 20% of the profits when they shipped his competitors products. When you have such a huge market share like he did the railraods almost had to accept if they wanted to stay in business since most railroad companies were in debt from the large start up costs to build the railroads.

The reason why monoplies can occur in a non regulated govt is that that there are usually two costs associated with running a business. Fixed costs and varriable costs. Fix costs include the start up, like factories etc. When a company becomes so large their price per unit drops because the fix cost becomes so small. While a small company has high fixed cost because they cant produce/sell as much their big company competitor and the cost per unit is higher and they have to sell for more to make any profit.

Then once a monopoly occurs they can set the price above the equliberium which is usually an elasticity over 1, and make people pay more money because they dominate the market.