[The Don]

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Power is power is power. The primary reason why microsoft was able to acquire and then maintain its dominance was that it was able to leverage it's power in the pc industry. But, more to the point, if a person or business has an emerging monopoly (the standard oil example that has been discussed) that business has the power of politics and the power to become more exploitative, so the two things, the power of dominant business and the government power are usually walking in lockstep and are therefore, not entirely distinguishable.

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I have no problem with “power,” so long as it is gained without the aid of government.

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I think predatory pricing is profitable for business in the short run. That may be what you meant to say... I was anticipating the statement that predatory pricing is profitable in the short run but not the long run. But, as far as it not being profitable in the long run, capital is pretty fluid, and once the party is over it can easily be moved elsewhere, and usually is. But, depending on how much power is wielded by the monopoly, it may not matter how predatory the prices are if no one can do anything about it, for example, no one is really able to contest microsoft windows as the dominant OS (the extreme, imaginary example is the company that provided air on mars in Total Recall, it took a revolution and the ruins of alien technology to free the people from its control.)

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Ha, well it depends on how short of a run. I was referring to the period where the business sells at below cost to drive out competitors. If you are talking about the period afterward, where they inflate prices far above costs, then I also don’t think this is profitable because of the losses suffered in the previous period. This also won’t last long because competitors will see a profit opportunity and seek to enter the market.

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Because they are uncertain about the future of the market, it is unsafe for them to lower prices to the level which is very likely to put other firms out of business.

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This is exactly what they do. And uncertainty has never been a reason not to grab power.

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I was referring to them lowering prices below costs. Historically, this is very rare. If firms do choose to do this, however, I am not against it as I will benefit from the low prices. The firm is essentially shooting itself in the foot... this is why you don't see predatory pricing, not antitrust.


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This seems to me to be a reason why monopolies are usually quite unstable, but not why they won't happen. The type of industry (which, in a sense means the quantity of power wielded) has a big impact on how possible it is for a monoply to be stable. When there was only one company in the country that could provide telephone service and the notion of putting up a parallel infrastructure was all but unthinkable, that was quite stable, anti-competitive and very exploitable. When a company is the only one able to supply a region with coal(the robber barons) and that was the only way for people to survive a winter, the people had to concede and had to allow themselves to be exploited, and there was nothing anyone or competitive buisiness could do about it, at least for the short term.

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Again, I have no problem with “monopolies.” If they are providing goods/services at low prices then I am happy. The point is that monopolies typically don’t “exploit” people because they realize that it is bad for business. Theoretically, if they did, there would be bad short-term consequences for consumers. Historically, however, the only monopolies which have exploited people have achieved “power” with the aid of government.

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I think there is a hidden assumption here that is not entirely true, namely that a company is a thing that provides a product or service, competing in an industry. While, there is a sense that this is true, a better definition would be a company is a thing that uses capital to generate capital. In a capitalist economy companies look at their service or their product as an expense. Put another way, it is the incovenience associated with acquisition. But acquisition is all there is. So anytime that a company feels it is worth it in the short term to enact predatory pricing it will. That company can always move its capital to other industries where better opportunities to acquire capital exist once the party is over, and they do this.

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Firms which have a dominant position in the market don’t enact predatory pricing schemes because they realize it is unprofitable. Firms which have power through government protection, however, are free to because they realize that their position cannot be compromised.