Just sat in a lecture that made me rethink capitalism

[Phokus]

1. monopoly by definition is 100% control, anything less and the consumer does have a choice. It may not be a good choice, but it is still a choice.

2. Monopoly usually do not last forever as things do change.

3. Very few monopolys exist, and opentable is not one of them. A dominant player yes, a monopoly no. I did say monolopies do exist, but most of them are typically govt sanctioned

1. Only in the literal sense. In common usage, no it does not literally mean 100% control. Milton Friedman was not wrong in referring to DeBeers as a monopoly even though they didn't have 100% market share.

2. Nobody said monopolies last forever.

3. OpenTable is certainly a monopoly. Whether they are the only player or not, they have the power to act like a monopoly. This is the reason why people use the term 'monopoly' in situations like this. You're arguing over semantics when the real meat and potatoes usage of the term monopoly is interchangeable.

Additionally, you are implicitly confusing the chicken or egg problem with government sanctioned monopolies. In the case of utilities (the classic government sponsored monopoly), the government doesn't really create or even sustain the monopoly, the government legally calls those utilities a 'monopoly' so that they can regulate them and they don't abuse their natural monopoly powers.

http://en.wikipedia.org/wiki/Natural_monopoly

When you try to have direct competition in industries with extremely high capital costs, it's extremely hard to cover those costs and become unprofitable. In Britain, they tried this and people died because they couldn't get the necessary water and they lived in unsanitary conditions as a result.

Historical example
Such a process happened in the water industry in nineteenth century Britain. Up until the mid-nineteenth century, Parliament discouraged municipal involvement in water supply; in 1851, private companies had 60% of the market. Competition amongst the companies in larger industrial towns lowered profit margins, as companies were less able to charge a sufficient price for installation of networks in new areas. In areas with direct competition (with two sets of mains), usually at the edge of companies' territories, profit margins were lowest of all. Such situations resulted in higher costs and lower efficiency, as two networks, neither used to capacity, were used. With a limited number of households that could afford their services, expansion of networks slowed, and many companies were barely profitable. With a lack of water and sanitation claiming thousands of lives in periodic epidemics, municipalisation proceeded rapidly after 1860, and municipalities were able to raise finance for investment, which private companies often could not. A few well-run private companies that worked together with local towns and cities (gaining legal monopolies and thereby the financial security to invest as required) did survive, providing around 20% of the population with water even today. The rest of the water industry in England and Wales was reprivatised in the form of 10 regional monopolies in 1989.

Other types of government sponsored monopolies, like the ones as a result of Intellectual Property are stupid to debate as to whether to have them or not because without IP laws, most of those IP wouldn't even exist because there's much less incentive to create them. It is legitimate to debate how long IP should be enforced, what should be classified as IP, or whether companies can sit on IP doing nothing with them though.

 

[werepossum]

And as I stated, if opentable is being unreasonable to its customers as you claim, someone else is going to step and take business away from them.

Agreed. Just when Blockbuster had driven out of business pretty much every competitor, along comes RedBox and Netflix. Only with government support do monopolies endure in a free market.

 

[Phokus]

Agreed. Just when Blockbuster had driven out of business pretty much every competitor, along comes RedBox and Netflix. Only with government support do monopolies endure in a free market.

Like the water utilities example i posted above, no wait, direct competition failed because those types of businesses are only profitable when there's one supplier.

Historical example
Such a process happened in the water industry in nineteenth century Britain. Up until the mid-nineteenth century, Parliament discouraged municipal involvement in water supply; in 1851, private companies had 60% of the market. Competition amongst the companies in larger industrial towns lowered profit margins, as companies were less able to charge a sufficient price for installation of networks in new areas. In areas with direct competition (with two sets of mains), usually at the edge of companies' territories, profit margins were lowest of all. Such situations resulted in higher costs and lower efficiency, as two networks, neither used to capacity, were used. With a limited number of households that could afford their services, expansion of networks slowed, and many companies were barely profitable. With a lack of water and sanitation claiming thousands of lives in periodic epidemics, municipalisation proceeded rapidly after 1860, and municipalities were able to raise finance for investment, which private companies often could not. A few well-run private companies that worked together with local towns and cities (gaining legal monopolies and thereby the financial security to invest as required) did survive, providing around 20% of the population with water even today. The rest of the water industry in England and Wales was reprivatised in the form of 10 regional monopolies in 1989.

Privatized/direct competition literally killed people in this case.

Also, it 'only' took Debeers more than 100 years before their monopoly went away.

 

[werepossum]

Like the water utilities example i posted above, no wait, direct competition failed because those types of businesses are only profitable when there's one supplier.



Privatized/direct competition literally killed people in this case.

Also, it 'only' took Debeers more than 100 years before their monopoly went away.

Your water utilities examples would, ahem, hold water IF you could show that those municipalities with government-owned water companies experienced lower rates of epidemic-related deaths than did municipalities with well-run private water companies. In other words, to make true your statement that "privatized/direct competition literally killed people in this case", you need to prove that those people who died of epidemics would not have done so had government owned and operated the water utilities.

Even could you do so, your example would, of course, still suffer from two major flaws. First, a water utility is a fairly unique entity in that facilities cannot easily be shared among competitors, even to such an extent as can electricity utilities. This is true even today. Second, you are using an example from one to two centuries ago. Eighteenth and even nineteenth century England was hardly a free market, nor did it have many companies capable of creating and properly operating such an enterprise. Even in late nineteenth/early twentieth century England, many poor neighborhoods even in London itself had no running water in most houses and apartment buildings beyond a tap in the yard, never mind forced water sanitation, in spite of the fact that the vast majority of water utilities were by then owned by the beneficent governments. One could thus with equal validity say that those people who died in the tenement epidemics died from a lack of direct competition, given that by your article's own words "A few well-run private companies that worked together with local towns and cities (gaining legal monopolies and thereby the financial security to invest as required) did survive, providing around 20% of the population with water even today." This also puts you in the awkward position of saying that monopolies are bad - unless they are government monopolies. This is a poor defense against others saying that monopolies are usually maintainable only with government collusion, as the two points are not necessarily in opposition.

This example hardly says anything useful about modern day capitalism or free markets. I cannot speak to the de Beers with any authority, but I'll agree with TK149 that there is more than a level of magnitude's difference between a practical monopoly - such as Microsoft once had with its PC operating systems - and an actual monopoly, where a royal warrant means there can be no competition whatsoever. With the latter, the consumer almost without exception suffers. With the former, treating it as an actual monopoly generally makes the consumer suffer more, as there is still no competition but the additional government taxes raises the price the consumer pays for the same product.