Supply, Demand, Monopolies, and Politics

[Jdmathew]

Newegg has taken full advantage of the [HDD shortage] crisis to gouge as much as possible. It seems unlikely that their 200-300% markups are fair market value. Obviously, customers can respond by simply not purchasing from Newegg.

Yes indeed. Thank you college economics! And this is a prime example of why Monopolies are great for business but bad for consumers, not that Newegg is necessarily a monopoly.

Remember this the next time you wish doom on AMD and root for Intel. If AMD loses their competitive edge, Intel can use any excuse to demand outrageous prices on their products. No competition makes a fat and lazy cat.

My question is which would be a better political policy...
1. Let monopolies flourish until competitors naturally take back market share... or
2. Legally restrict the operation of Monopolies by forcing price ceilings, fines, settlements, etc

I would probably vote for the first policy because it would spur innovation and business start ups in the long term... I imagine option 2 would be a temporary relief for consumers but would ultimately stunt economic development within an industry. But I understand that a government can generate income by fining the "bad" monopolies. I guess this outlook is what makes me a "smaller governement" type of person and typically Republican, but I'd like to hear your views.

Please vote and share your views.

 

[Anarchist420]

There is no such thing as a natural monopoly. Murray Rothbard's works on monopolies are good reads.

Standard Oil was not a monopoly because it never had 100% of the market share and they delivered bettter products and prices. They even were environmentally concious. For example, when their competitors were dumping waste into the waters, Std Oil was being efficient and came up with environmentally friendly ways to dispose and to reuse. At the time of their breakup, their competitors were gaining market share.

 

[Craig234]

Your question has bias - monopolies 'run their course', as if they naturally are limited and don't continue. It makes them sound like less of a threat than they are.

It has additional bias in the word 'punish' for regulation. That's a common right-wing bit of propaganda rhetoric. It's not a spanking.

 

[frostedflakes]

Don't really see what relation retailers increasing prices in response to a shortage has to do with monopoly.

But anyway, as mentioned it's actually pretty tough to achieve a monopoly by being so much better than your competitors that you drive them all out of business. Many of the famous monopolies came about by government granting special privilege to certain companies. AT&T, for example, started out as a government-sanctioned monopoly. It could be argued that the trusts of the 19th century might never have come about without protectionist tariffs that gave domestic industries an unfair advantage and reduced competition from foreign companies. etc.

Interesting read about the "Robber Barons," provides a different perspective than the conventional wisdom on the businessmen of this time.

http://mises.org/daily/2317

 

[a777pilot]

Can any of you name a monopoly that exists in the United States today? The closest one I can think of is Microsoft and that company is far from a monopoly. So why this poll?

 

[Double Trouble]

The critical part is not restricting the actual monopoly, it's restricting the conditions that allow a monopoly to exist and flourish. For starters, most monopolies tend to be government created and/or sanctioned. For example, your local cable company might have a monopoly in your area because of local government, not because of any competitive advantage.

If a company becomes dominant in an industry because consumer choose to do business with them instead of someone else, that's perfectly fine. If a company becomes or continues to be a monopoly by manipulating the environment (competitive, legal, regulatory), that's a problem and the consumer will suffer.

The quote you posted about Newegg makes no sense. There are hundreds of vendors out there, you are free to choose whichever one you want. That pretty much ensures that the consumer is going to get the best deal. "Gouging" not found, especially in a product that's not a critical necessity of life.

 

[soulcougher73]

Since when do monopolies "run their course" if left unchecked? Usually they are dismantled via government regulations or some such.

 

[Baptismbyfire]

The critical part is not restricting the actual monopoly, it's restricting the conditions that allow a monopoly to exist and flourish. For starters, most monopolies tend to be government created and/or sanctioned. For example, your local cable company might have a monopoly in your area because of local government, not because of any competitive advantage.

This is a good point. Companies that in the past that had a monopoly, or something close to it, like AT&T and Western Union, were granted sole use of public assets, such as airwave or telegraph line, by the government, without paying for their usage, even though often those new technologies were developed using tax dollars.

 

[the DRIZZLE]

This thread is a complete non sequitor. The hard drive shortage has nothing to do with monopolies. There is a shortage so prices are higher, I really don't understand how their prices aren't fair market value, everyone seems to be selling for around those prices since the shortage started.

To directly answer your question, monopolies need to be broken up when they engage in anti competitive behavior that hurts consumers. Natural monopolies like utilities need to be regulated.

 

[Craig234]

Can any of you name a monopoly that exists in the United States today? The closest one I can think of is Microsoft and that company is far from a monopoly. So why this poll?

We don't need laws against slavery. The fact you can't show me any companies that sell slaves in the US today proves it's not needed.

 

[sao123]

monopolies only happen because of a broken patent/copyright system.
remove the cause... and bam... no more monopolies.

 

[sandorski]

First, Newegg is not a Monopoly by any definition. Are they even the largest Retailer of HDs in the US?

Secondly, this is a simple Supply issue. Every Retailer has increased Prices because of it.

Thirdly, Newegg and many other Retailers also sell complete System builds. This requires them to protect their HD Supply to an extent, but they still need to offer HDs for sale or Consumers will shop elsewhere.

..and finally fourth, The HD Manufacturers themselves are likely charging higher Prices to offset their loss of Volume Shipments.

The premise of this thread fails on multiple levels.

 

[BurnItDwn]

Monopolies must be broken up or publicly owned.

Anti-competitive practices should be dealt with harshly.
IE, company has local monopoly and decides to sell products at a loss to drive competition out of business, then jacks up prices...

 

[Londo_Jowo]

Originally Posted by Cheesetogo
Newegg has taken full advantage of the [HDD shortage] crisis to gouge as much as possible. It seems unlikely that their 200-300% markups are fair market value. Obviously, customers can respond by simply not purchasing from Newegg.

Damn, I wonder if I should put up my old SCSI 160/320 and SATA1 drives on eBay.

 

[DaveSimmons]

Monopolies are legal in the US and elsewhere, they are just subject to regulation.

Microsoft got into trouble with the DOJ for repeated abuse of monopoly power not for "being a monopoly" as many people seem to think.

And as mentioned, Newegg profiteering has nothing to do with monopolies.

 

[Munky]

Like others have stated, it's not the monopoly that's the problem, but their abuse of power.

 

[momeNt]

I agree with Anarchist, no such thing as natural monopolies.

 

[Craig234]

monopolies only happen because of a broken patent/copyright system.
remove the cause... and bam... no more monopolies.

That's not correct.

 

[Lithium381]

changing prices to adjust for economic situation? like airlines charging more for tickets two hours before the flight leaves, or lowering the price if the flight isn't full?

 

[Howard]

We don't need laws against slavery. The fact you can't show me any companies that sell slaves in the US today proves it's not needed.

Many monopolies exist in the US. You shouldn't have responded in a way that validates even a portion of what he stated.