I’ve been arguing with my father about monopolies in the free market.He has the typical statist view that the government is necessary to prevent the formation of monopolies and he cites the “predatory pricing” argument (which is the only thing that seems to be holding him back from fully supporting free market).
I explained that if a company that controls the marked in one industry decides to raise the price, it attracts competitors towards that industry which wold force them to either maintain lower prices in order to discourage competition in benefic to the consumer, or face new competitor which would also benefic consumers.
But he didn’t seem to convinced,so I was wondering if anyone here cold help me explain further or add something to the argument in order to make it more convincing, and also to explain how contra-productive anti trust laws are.
I would buy him Dominck Armetano’s book but he doesn’t speak English and I haven’t been able to find it in Spanish.
One way I attack this is to go down the list of all the Government Mandated Monopolies, ie energy, water, gas, telcom. Typically when there is a monopoly or near monopoly, it is because of Government Mandates. It’s not quite anti anti-trust, but at least it argues that monopolies are not necessarily spontaneously formed, but mandated.
I sort of agree because it shouldn’t take a constant stream of people willing to have failed businesses to keep prices in check. if a business repeatedly puts competitors out of business people will be discouraged from entering the field. what entrepreneur wants to try to compete with wal-mart on pickles for the 10th time, when the last 9 failed?
I suppose one could argue for some sort of equilibrium, where a monopolist won’t raise prices beyond the threshold at which competition becomes financially feasible, but the monopolist will also work behind the scenes to make sure the barrier to entry for the field is high, thus raising that equilibrium point and making more money.
note that we already have this problem in real life, with certain industries lobbying to enforce more regulation; artificially limiting supply.
I would ask him to define a “monopoly” first and foremost.
The predatory pricing argument has been debunked. It is both ahistorical and irrational. You needn’t buy him the book, I would just suggest knowing the material well enough to be able to recite the arguments when needed. It is much easier to do that than continually refer people to books they should read.