Re: My take on Party
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You are correct when it comes to economic theory. An important consideration here though is that the low cost producer always wins out. Right now, thanks to volume, Party is able to be the lowest cost producer.
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Low-cost producers normally win out because they can undercut their rivals' prices without losing money themselves. Note that Party isn't trying to undercut other sites. Rather, it's doing the opposite. Party's rake is substantially higher than many other sites (Stars, for example), and by scaling back on monthly bonuses it has actually *increased* its effective price even further.
That's the whole thing. Party is a pretty expensive place to play relative to other sites. Granted, it's games are somewhat softer than what you could find elsewhere, but they're not THAT much softer that players can't increase their earn through rakeback or bonuses above what they would get at Party just through regular poker winnnings.
If Party has a cost advantage, which I'm not really sure about, Party could crush its rivals if it openly allowed rakeback (like several other sites), handed out a bunch of bonus money (like Absolute), and slashed their rake (like Stars). Once other sites are out of business, Party would have this market all to itself, and network effects would make it quite difficult for any new rivals to enter the market to compete. Party is actually following the opposite strategy. It is allowing its rivals to increase their share of the "small time but still serious player" market by dramatically raising its price.
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