Fluery: Sorry to bump/hijack a thread, but I had a small question about monopolies and didn't want to create an entire new thread. In a discussion somebody mentioned a reason they were against total deregulation was because of monopolies. I mentioned how they wouldn't really exist in the current sense without the government allowing them to. He asked about businesses that require high initial investment (and can therefore "break the laws of supply and demand by controlling the supply") He gave the example of AT&T in the 80's and how they owned most of the phonelines in the US and nobody else could come in b/c of the startup cost with little guarantee of success. I'm sort of new to all this and was confused by his response. I was wondering if anybody could either address it, or point me to a paper or something. Thanks!
Sorry to bump/hijack a thread, but I had a small question about monopolies and didn't want to create an entire new thread.
In a discussion somebody mentioned a reason they were against total deregulation was because of monopolies. I mentioned how they wouldn't really exist in the current sense without the government allowing them to. He asked about businesses that require high initial investment (and can therefore "break the laws of supply and demand by controlling the supply") He gave the example of AT&T in the 80's and how they owned most of the phonelines in the US and nobody else could come in b/c of the startup cost with little guarantee of success.
I'm sort of new to all this and was confused by his response. I was wondering if anybody could either address it, or point me to a paper or something.
Thanks!
I think one important aspect of this is that the infrastructure can't be put up without government permission, as it is on public property. I would bet that government had a large role to play.
Besides, a company has to recoup the startup cost before truly profiting. If it takes a long time to recoup those costs, so that no one else will put up the money for a similar infrastructure, is the company engaging in evil monopolistic policies? If the company makes back its initial investment quickly, then others will be willing to make a similar investment. Even in the first case, over time the cost for another company to put in place a similar infrastructure will generally be falling. And there's always a possibility that new technology can provide a similar service with a different (cheaper) infrastructure. Using the government to prevent a new company to enter a market is the best way to keep a monopoly no matter what.