[net.politics] monopolies and competition

trc@houti.UUCP (06/06/83)

Response to David Sher on monopolies:

If the entry costs are too high, relative to the profits, to encourage
market entry, why is the monopolist in that business?  And how would
he afford to enter it?  If you mean that the costs are simply too
high for the small businessman to enter, though the profits are very 
good once the costs are overcome, it is likely that the monopolist
will soon have competition from other large concerns with the necessary
cash, or from a consortium of businesses, each taking on part of the 
burden in return for a share of the profits.

Actually, there is one valid way to get a true monopoly without any use
of force or government protection (as in patents).  This is the trade
secret - where a company has developed a secret process that gives it
a tremendous advantage over its competitors, allowing it to CUT costs
while making good profits.  So long as it maintains lower prices than
its potential competitors could provide (or substantially higher quality
for the same price) it will be able to hold a monopoly in that area.
For really new products, other businesses can compete by doing research, 
and developing their own similar product.  While this may sound inefficient 
- reinventing the wheel - it is the source of new products.

The important thing to remember is that competition is NOT a goal.
To the businessman, it is the (ethical) means to a good end, namely of 
making products and selling them to willing customers.  To the customer,
competition is beneficial, but again, what counts is that desired products
are made available by ethical means.

(Before someone mentions it, "cut-throat" and "dog-eat-dog" competition
are labels that are usually used by those that cannot, or do not want to
compete in a free market.  For an interesting examination of some of the
motivations for such an attitude, read "Atlas Shrugged", by Ayn Rand.)


	Tom Craver
	houti!trc