Rick Rollin wrote:-snip-
Not helping!
Bendira wrote:Actually, I’m absolutely convinced that monopolies and cartels are inevitable under a free market.
To understand why, you need to have another look at the Prisoner’s Dilemma. You see, it actually comes from a field of research called game theory where...
Oh, right... You don’t believe in research that does not produce profit... Oh well, I’ll try anyway...
Look, here’s the payoff matrix, listing the choices of Company A and B in a case where both companies are equal:
Company A lowers prices, hoping to outcompete Company B Company A keeps its current prices Company B lowers prices, hoping to outcompete Company A Both companies now run at a loss but neither can outcompete each other. Company B might outcompete Company A, provided that it can survive running at a loss longer than Company A can. Otherwise Company B itself goes out of business. Company B keeps its current prices Company A might outcompete Company B, provided that it can survive running at a loss longer than Company B can. Otherwise Company A itself goes out of business. Both companies keep working as before.
Examining these options it should be obvious why both companies would prefer to keep their prices. It’s the only option that ensure, with absolute certainty, that both companies continue to exists.
Go read my example of why predatory pricing in a free market would not exist. Search WAL-MART in the search bar for this topic and you should find it.Now, let’s examine the payoff matrix for a case where Company A is much bigger than Company B:
Company A lowers prices, hoping to outcompete Company B Company A keeps its current prices Company B lowers prices, hoping to outcompete Company A Both Companies now runs at a loss, but Company A can survive this for much longer than Company B. Soon, Company B will out of business. Company B now runs at a loss which it cannot sustain for long. Soon, Company B will be out of business. Company B keeps its current prices Company A now runs at a loss, but Company B will soon be out of business. Both companies keep working as before.
Examining these options it should be obvious that, for Company B, the only way to survive is to keep the current prices. On the other hand, Company A is much better off lowering its prices in order to drive a competitor out of the market.
In the end, you will either have a single giant company maintaining a crippling monopoly on the market (the case where Company A is much bigger than Company B) or you will have a cartel (the case where Company A and Company B are equal).
Again, go search for the WAL-MART example.
I disaagree with that table too. There are other ways to lower prices and get some profit still. Lower the wages. If you make it too low, though, then the people will go to another compny to buy things from there. But this table also is missing two things: Technology and force or fraud. Add them in and you'd see a very unique pattern. Look, even if there is a monopoly charging terrible prices, in a free market, people can always set up their own companies as well.





the GTFO argument fails.