Even if a monopoly is plausable, it would be so much more so under some form of government intrusion type mechinism (corprotism, socialism, fascism, etc) than free enterprise.
You mean derive over 300 products from the waste of kerosene production and lose its market share before it was busted up by antitrust regulation?
If he did it honestly, I don’t see a problem with it. In a free market, he could have been the dominant player if he was better in business, had more capital to invest etc. I’m not sure how this relates to the discussion though.
We’re discussing whether or not monopolies guarantee higher profits than competition. Or from the inverse, whether or not competition can increase profits.
It’s impossible to know for sure, but I would hope so.
However by the time the U.S. government dissolved Standard Oil in 1911, the company’s market share had already declined to 25% because of normal marker competition.
It’s a really primitive question. I don’t see why all monopolies would have same outcome.
Seems like states had their part in helping dissolve Standard Oil up until 1911 though, which I’m sure was a part of the reason why its market share declined.
I don’t think so. In fact, I think that discussion on monopoly vs. competition are very important because while the Misesians have a lot of theory on it, but discussions for the layman are lacking.
They wouldn’t. But the perception of monopoly is that it is bad, even as held by Austrians (state monopoly) because it allows for undeserved profit (earned without competition or by disreputable tactics).
But I would say that not only is the market more fair and just, but collaboration and competition increases the size of the market, increases efficiency and increases aggregate profits. To the point that the largest player in a competitive market could make more profit than a monopoly.
I would have to believe that a monopoly would hold a greater profit for the producer, compared to his competitors, for obvious reasons. The downfall of the monopoly would probably come if the output of the product isn’t meeting the demand for it and the price. So, in a free market, I’m sure that someone else would eventually figure out a way to either do it “better” or people would simply stop caring for the product.
Agreed.
However, the decline had started before the government intervened, so while the decline of Standard Oil was accelerated by the U.S. government it certainly wasn’t initiated by it. According to historian Gabriel Kolko S.O.'s decline was “primarily of its own doing - the responsibility of its conservative management and lack of initiative”.
No food lasts forever, even in storage.
But I could not use them to make cars, or build a home, or make clothes, etc., etc.
So? If I have a monopoly on bananas, I can market bananas for all of those needs. Sorry, I just do not get what you are trying to get at here.
True, but you could use them for other things
So? All that matters is that you could use them for something, and that they therefore have some (although increasingly small) value. See Menger on this.
I suppose you could (see my edit). I guess the point was that in situations that a monopolist is not doing everything he can, competition could lead to increased profits. The argument was not that monopolists do not generally make higher profits, just that it is possible, in some circumstances, that a monopolist can make more money after giving up/losing the monopoly.
However, the whole point of this was that piracy could increase profits. You denied this by saying monopoly always leads to higher prices. Not only is this not an accurate comparison (its not that a competitor is incurring costs to make the same product and sell it for profit, just that people are making copies of it and giving them away for free. In a sense, it isnt really “competition.”), but we can theorize an example in which it is the case.
Consider the following. A company with a monopoly on its music files sells them for $20 per CD. They sell 100 copies the first year, and would sell 200 the next. But, before the next year, filesharing is invented. This allows people to copy the songs and share them. Although, lets say, 25 people decide not to buy the cd because they can just download it, the sharing leads to much more people hearing the songs and becoming fans. Because of this, the company sells 300 albums the next year, making more money.
EDIT: it is true that theoretically the monopolist could have given the music files away for free to all the people who ended up listening to downloaded files and then buying the cd. In this way they could see the increase sales, and not give them to the people who did not buy the cds because of it. Its just that it is impossible for them to know how that would work out and would never do that as a matter of practicality. (end edit)
The only point was that a situation like this is possible, not that it will always happen. I certainly agree that monopolists generally enjoy higher profits. But i think music copying/sharing is a unique example in many ways, and can possibly lead to a situation like the one above.
What if you don’t have enough capital? What if you don’t discover alternate uses? What if you aren’t capable of fully serving the existing market due to poor logistics (or again, lack of capital)?
Competition grows markets. Larger markets, larger profits.
I think the key is: competition leads to entrepeneurship.
Given that because I have a monopoly on bananas, thereby pushing the supply curve down, the demand curve will be pushed over. So, investment money will be pretty easy to come up with.
People can buy the bananas and come up with alternate uses if they like and sell them.
I see no reason to believe this to be the case.
I am just talking about the idea that you can get more money for your product if you have a monopoly on it. Property rightslead to entrepreunership.
You can get more money per unit but that doesn’t mean that your revenue will be higher, nor that your profit will be higher. The higher the price goes, the more people you shut out of the market.
This is not necessarily true. Thomas diLorezon covers this, to a very slight degree, in his book How Capitalism Saved America. A monopoly that was not protected by the state (through price floors) would not be able to increase prices and hope to keep the monopoly; competitors would simply come into existence (this assumes that natural monopolies are even possible).
You cannot indiscriminately raise prices and keep competitors out of your market (unless the government enforced a price floor, such as during the Great Depression), and so by raising prices the “monopoly” would only be causing a decrease in demand for their product (they could either opt for a substitute in case of a price floor, which has happened historically, or a competitor would supply the same product for cheaper).
This is true, but this statement should be confused with only property rights lead to entrepreneurship. Property rights may be a leading cause, but competition will always drive entrepreneurship. If Person A is making a hefty sum of money running a business with Plan A, then Person A will not be inclined to try Plan B, because it’s a risk (and Plan A is already working). But, if Person B is competing with Person A, then Person B may try Plan B, C, et cetera, to be able to compete.
I don’t see how anyone could disagree with this.