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From: oaf@mit-vax.UUCP (Oded Feingold)
Newsgroups: net.politics
Subject: monopolies unstable?
Message-ID: <4823@mit-vax.UUCP>
Date: Tue, 5-Mar-85 13:25:33 EST
Article-I.D.: mit-vax.4823
Posted: Tue Mar  5 13:25:33 1985
Date-Received: Fri, 8-Mar-85 02:45:25 EST
References: <2015@inmet.UUCP>
Reply-To: oaf@mit-vax.UUCP (Oded Feingold)
Organization: MIT, Cambridge, MA
Lines: 31
Summary: Is this real life or ivory-tower st„ff?

Context:  nrh@inmet attributing to dmck
    >As it happens, I do believe that monopolies are not stable unless
    >given special, generally government-based protection.  As Daniel McK.
    >points out, such monopolies leave themselves open to "cracking"
    >if they charge rates over their marginal costs -- if, in other words,
    >they get greedy.  
Forgive my naivete, but it strikes me that monopolies can get nice and
greedy and not be destabilized.  I recall stories of Standard Oil driving
out competition by giving it away free until the competitor dropped dead,
then raising prices.  Also of Bell Telephone doing the same.

Whether the stories are true is immaterial.  The point is that when
analyzing at anything but the surface level, monopolists/oligopolists
can easily distort a "free market" to their liking.  They have economies
of scale, they can survive a drought (like giving it away for free), 
they can integrate vertically and horizontally, hence squeezing others
out of starting up, etc.

What am I missing, gentle readers?  The flamacious economic discussions
here seem based on sand, living as they do on assumptions of hypothetical
societies and systems.  Is this really where it's at?

Cheers,



-- 
Oded Feingold			UUCP:	mitvax!oaf
MIT AI Lab			Arpa:	oaf%oz@mit-mc.ARPA
545 Tech Sq.			AT&T:	617-253-8598
Cambridge, Mass. 02139