[peritonlogon]

I'm no expert on the issue, but here are some ideas that may add a bit to the discussion.
[ QUOTE ]


Fallacies:

1) Firms can gain monopoly status without the aid of government

I am not one to claim that it is impossible for firms to attain a monopoly status which is detrimental to consumers. I will claim, however, that this is impossible without the aid of government. Take Microsoft for example; the prices of their software would be significantly lower if it were not for the state-imposed intellectual property laws. Simply put, these laws prevent other firms from entering the market -- not the efficiency of Microsoft’s production. It is ironic that the government went after Microsoft for their monopoly via antitrust, seeing how it is the entity which caused it.

[/ QUOTE ]

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.

[ QUOTE ]


3) Predatory pricing is profitable for businesses

I think it is clear to everyone that predatory pricing is unprofitable for the monopolist in the short-run. I contend, though, that there is no way for this to be profitable (or at least more profitable than standard pricing practices) in the long-run. For example, Wal-Mart has held a very dominant market position for well over a decade; putting many other firms out of business with their low prices. During this time, however, they have continued to offer the lowest prices in the market, failing to artificially raise them at the expense of the consumer. They are profiting, and the consumer is receiving goods at low prices. Why is this? Why wouldn’t they just sell below cost in an attempt to drive everyone else out of business, and then raise prices to artificially high levels?

[/ QUOTE ]

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.)

[ QUOTE ]


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.

[/ QUOTE ]

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

[ QUOTE ]

Why? Consumers will harbor a grudge (change in tastes and preferences) against the monopolist when they raise their prices to artificial levels. At the same time, other firms will see the opportunity to enter the market, given the high prices and the overall dissatisfaction with the monopolist. The monopolist may again try to lower prices to below cost, driving the other firms out, and the cycle will continue...

[/ QUOTE ]

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.

[ QUOTE ]

Here’s the point; this predatory pricing scheme simply isn’t more profitable than offering products at a price which is reasonable in relation to their costs. It just doesn't make sense for the predatory firm to constantly manipulate prices in the face of competition, when, under normal circumstances, they would have a dominant market position regardless.

[/ QUOTE ]

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.

Now, in my view, a monopoly is only one example of where power is leveraged over people to attain more capital than a more free market would have allowed. Another form is the collusion of companies. The entire health insurance industry is an example of this and it doesn't seem like it is going to end anytime soon, since it is way way way more profitable not to break ranks and the people don't have the will to call for legislation to end it.