While Mises' general argument for the possibility of a free market monopoly has been, I think, demolished by Rothbard's point that all exchanges are monopoly/monopsony pairs; there is an argument in Human Action which I have not heard discussed before and which demolish many arguments made against them, whether or not they naturally occur:
Monopoly, of course, need not result in monopoly prices. It depends on the special data of each case whether or not a monopolistic public utility company could resort to monopoly prices.
Even in the case where someone has an exclusive ownership of a good it does not follow that he will charge higher rates because he may lose more total revenue that way. It may be better for the monopolist to continue or even expand his pre-monopoly total production, provided that his rate of return increases. What monopolies do is reduce competitive pressure on prices and quality, they do not necessarily imply an increased price compared to the pre-monopoly situation even holding all other factors constant.
The three possible ways to define a monopoly are 1)Exclusive ownership of a good 2)Government protection that grants a company a specific production privilege 3)When a company acheives a monopoly price. Rothbard has shown that a "monopoly price" cannot be isolated in a market and is no different than the "competitive price" or free market price. Definition 1, which you seem to be describing, is also fallacious because what is considered a good is up to the consumers and not a economist to decide, what constitutes a monopoly of a "good" is vague (is one seller in one small town a monopolist or does he have to be the only seller on the planet?), and using this defintion would make the classification of monopoly a broad one, because anyone who produces a differentiated good must be considered a monopolist.
Furthermore, your description of monopolies reducing competitive pressue is no different than any other business trying to beat out their rivals. Every business is trying to offer the best product at the lowest price in the greater quantity to acheive maximum profits.
I think you miss the point I was trying to make:
1) I do not accept that natural monopolies exist, but even if they did there is no a priori reason for them to increase their prices or reduce their production. Which is something that people who argue they do exist often ignore. The most profitable price may be the competitive price; especially if they can sell to the masses of people who can't buy from anyone else.
2) Even a state-granted monopolist would not necessarily increase price. It was with reference to this sort of monopoly that I made my comments about the lack of competitive pressure tending towards a fall in quality.
Sorry if I sounded a little harsh.
Yeah, there is no a priori reasoning to suggest that monopolies have to increase price. I was disagreeing more with you on "competitive pressure", since every business is always trying to dampen competition.
I think you miss the point I was trying to make: 1) I do not accept that natural monopolies exist, but even if they did there is no a priori reason for them to increase their prices or reduce their production. Which is something that people who argue they do exist often ignore. The most profitable price may be the competitive price; especially if they can sell to the masses of people who can't buy from anyone else. 2) Even a state-granted monopolist would not necessarily increase price. It was with reference to this sort of monopoly that I made my comments about the lack of competitive pressure tending towards a fall in quality.
This is because even "monopolies" have to compete with all of the other uses for a consumer's time and money. It doesn't matter if you're the only person who makes your product if nobody wants to buy it.
Monopoly is defined by a limitation on supply. It may be the case that a specific market has only one or even zero firms active, but that does not make it a monopoly.
The fallacies of intellectual communism, a compilation - On the nature of power
Mises' theory of monopoly is probably the part of his analysis that is closest to the neoclassicals, though he does seem to make some subtle points that elude the latter authors. Essentially, he states it depends on the shape of the demand curve Q(P), and hence therefore whether PQ-C(Q) has a finite maximum. I actually deduced this with some calculus when reading that part of HA for the first time(one of the few times I ever felt I needed to do maths while reading the book).
Needless to say, I found it hilarious when studying neoclassical economics formally for the first time to see the professors doing the same mickey mouse newtonian calculus I deduced earlier on my own! I've yet to read Rothbard on monopoly, but am looking forward to it.
"When the King is far the people are happy." Chinese proverb
For Alexander Zinoviev and the free market there is a shared delight:
"Where there are problems there is life."