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Thread: In some cases, do free markets lead to crowning 1 industry giant/monoply ?

  1. #1

    Question In some cases, do free markets lead to crowning 1 industry giant/monoply ?

    I was just thinking about this... and look at the internet. We have Ebay/Paypal (same company after Ebay bought Paypal). I know there are smaller rivals, but they hardly can compete. The market has flocked to them and made them online kings, yes?



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  3. #2
    Depends on the market and its entry costs. Some businesses are more costly and expensive to set up- consider a plant to make microprocessors ala Intel or AMD. It takes millions in R&D and production costs and you need to be able to sell quite a few before you hit your break even point so if you can't sell a lot fairly quickly, you probably can't get up and running long enough to realize a profit and keep the business going. If you are talking a hamburger stand, the costs of entry are quite low and it is much easier to establish enough of a presence in the market to be profitable and survive.
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  4. #3
    A company may have a large majority of market share, but a complete monopoly is impossible without the force of government guaranteeing it. And even then it's not totally realistic because black markets will likely form.

    Ebay and Paypal are no where near monopolies. There are hundreds of ways to fund online purchases other than paypal. And there are tons of auction sites other than Ebay.

    If I was going to sell something online I wouldn't use either because of the high commissions. I would probably start with craigslist.
    Last edited by brandon; 07-08-2011 at 01:30 PM.
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  5. #4
    lol @ Paypal and Ebay being monopolies. They are monopolies, they are just popular. They are plenty of companies just like them.

  6. #5
    It is very rare, but it can happen due to efficiencies. But there is an argument the public is better served in those circumstances and if they weren't, so long as the barriers to entry (mostly, regulations in those instances) aren't too high, others would enter the field. Utilities need huge capital outlays and there is an argument for handling them differently, too, but that only shows that there are a few exceptions. Typically the free market works. The handful of places it doesn't you could take on a case by case basis. But being big is not in itself bad, to my mind, so I don't mind one company dominating so long as it is better.
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  7. #6
    Quote Originally Posted by sailingaway View Post
    It is very rare, but it can happen due to efficiencies.
    Can you name a few examples of where it could happen? I don't see how it could happen anywhere so long as people are free.
    Waiting for the day the classical liberals drive the hateful alt-right out of the republican party, and the libertarians can rise again.

  8. #7
    Quote Originally Posted by TheBlackPeterSchiff View Post
    lol @ Paypal and Ebay being monopolies. They are monopolies, they are just popular. They are plenty of companies just like them.
    I'm not saying they are - but Ebay/Paypal is ONE company. They dominate. I know there are others out there, but the free market has 'kinged' them.

    You can see how it's hard to compete against that, right? Craigslist is not a competitor because they are local, not nationwide.

    Who is going to sell on another auction site? Their product won't even be seen...

  9. #8
    In the absence of ani-trust laws, Intel could put AMD out of businsess if they wanted to. They have the resources to price their products for less than what AMD could sell for. They were busted (which again would not be illegal if you got rid of the laws) for paying companies like Dell to not use AMD products if they want to buy Intel. That would be an unrestricted market monopoly creation (no- I didn't call it a free market). But again, McDonalds could not achieve that.
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  11. #9
    Quote Originally Posted by Zippyjuan View Post
    Depends on the market and its entry costs. Some businesses are more costly and expensive to set up- consider a plant to make microprocessors ala Intel or AMD.
    Not a really good example, as there was no free market when those came into being.

    In a free market it is possible that some imagined company could possibly by unknown circumstances become a"monopoly", but it would be very likely based on their success at both producing a product and marketing it better than anyone else, rather than government regulations and legal manipulations.
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  12. #10
    Quote Originally Posted by Zippyjuan View Post
    That would be an unrestricted market monopoly creation (no- I didn't call it a free market). But again, McDonalds could not achieve that.
    Nah even if AMD did get eventually close up shop Intel still has other competitors. It wouldn't surprise me to see ARMH become the market leader within the next 10 years. Intels chips are too power hungry for the wireless revolution.

    There will always be competitors as long as competition is legal. Hell, I could design a $#@!ty processor in my basement in the next year and sell it. Would I be profitable? Probably not. But Intel wouldn't have a monopoly because I'm selling my processor too.
    Last edited by brandon; 07-08-2011 at 02:07 PM.
    Waiting for the day the classical liberals drive the hateful alt-right out of the republican party, and the libertarians can rise again.

  13. #11
    Quote Originally Posted by Romulus View Post
    I'm not saying they are - but Ebay/Paypal is ONE company. They dominate. I know there are others out there, but the free market has 'kinged' them.

    You can see how it's hard to compete against that, right? Craigslist is not a competitor because they are local, not nationwide.

    Who is going to sell on another auction site? Their product won't even be seen...
    You definitely have a good point about Ebay and Paypal. The thing with free markets is that it takes time (years in some cases) for a competitor to rise and offer a competing product or technology to take down an Internet King like Ebay. It takes time for ideas to be vetted by the public and become popular. On the other hand, in the world of regulation things can happen almost overnight.

    Ebay is actually a very good example of an "Internet King" in decline. While Paypal is still doing fine, Ebay has suffered from reduced revenues in the past years and thus have regularly increased their fee structures to benefit the bigger sellers (much to the chagrin of smaller dealers who represent Ebay's heart & soul, so to speak). They changed the feedback system to protect buyers and force sellers to I regularly accept losses due to scamming. In many cases, Paypal's (owned by Ebay) "seller protection" has become a joke.

    I sell on Ebay and use Paypal for hundreds a month in transactions. I can tell you that sellers are leaving Ebay in droves due to their fee increases and general disrespect for smaller sellers. Personally, I sell designer clothing and have turned to other specialized marketplaces that have sprung up. Take a place like Styleforum.net, a popular men's style forum with marketplace subforums. Sellers list things for free, accept Paypal personal/gift payments (no fees) and have dirt cheap prices compared to Ebay. There is not even a feedback mechanism in place--instead the forum members work to publicly humiliate the rare scammer by posting his personal information, phone #, photos, address, etc. It's quite effective.

  14. #12
    Yes, altough it is very rare. There are usually substitutes that make it impossible to call the company a true monopoly. See Sirius XM, a former victim of anti-trust laws and alleged monopolist, who now dominates totally the satellite-radio market. However other kinds of radio (Internet radio, FM radio etc) and entertainment compete for the same customers, making it impossible to call Sirius XM a monopoly.

    In a free market an exceptional company can become a monopoly with close to 100% market share. However, this does not mean that they can abuse the position - there is always the threat of entry that means the company must keep their prices low and their products competetive or face an entrant grabbing market share. Companies today understand that attempting to achieve monopoly without government is bad for profits - instead they attempt to expand the overall market which leads to higher profits.

    A monopoly in a free market is not harmful, as to achieve such position they must provide their customers with such extraordinary products at such low price that no one else can achieve similar standards.
    Last edited by Diurdi; 07-08-2011 at 02:30 PM.

  15. #13
    Quote Originally Posted by Romulus View Post
    I'm not saying they are - but Ebay/Paypal is ONE company. They dominate. I know there are others out there, but the free market has 'kinged' them.
    So, I guess that means I can auction off some of my guns on Ebay now, right?
    Maybe I can trade gold on Paypal?

    You can see how it's hard to compete against that, right? Craigslist is not a competitor because they are local, not nationwide.
    Somebody, quick, call the owner of MySpace and let him know he's still in business!
    And for all you guys with old 1990's subscriptions to EverQuest - bet you wish you hung on to them now that we know it can't be taken down!

    Who is going to sell on another auction site? Their product won't even be seen...
    It won't be seen because nobody is offering a suitable alternative.
    Yes, ebay is big. The problem isn't that they're big - the problem is that they are incredibly competitive.
    They're huge for the same reason World of Warcraft hasn't been knocked down yet. They keep adding features.
    Those features keep the users attached to them.
    As soon as someone comes out with a site with the same features that charges 10% less than Ebay, Ebay will disappear in a puff of smoke, just like MySpace did.
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  16. #14
    Quote Originally Posted by brandon View Post
    Nah even if AMD did get eventually close up shop Intel still has other competitors. It wouldn't surprise me to see ARMH become the market leader within the next 10 years. Intels chips are too power hungry for the wireless revolution.

    There will always be competitors as long as competition is legal. Hell, I could design a $#@!ty processor in my basement in the next year and sell it. Would I be profitable? Probably not. But Intel wouldn't have a monopoly because I'm selling my processor too.
    I hope AMD dies. Their processors are pure trash, and ATI, which used to be a great company, is now trash since AMD acquired it. May they burn in PC hell.
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  17. #15
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  18. #16
    Yes its possible that something that could be called a "natural monopoly" could arise, it would just be much different and less secure in its nature than a government created monopoly. Two different animals really. The only definition I'd give to "natural monopoly" is just one firm that happens to be the only one providing a type of good or service at a given time. Doesn't mean they'll just $#@! everyone over with ridiculous prices or quality though, they couldn't get away with that.

    Guess its just a semnatics debate (isn't everything?), as to what constitutes a monopoly. To me the only meaningful definition of monopoly refers to the government created kind, its the only scary type of monopoly.



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  20. #17
    Quote Originally Posted by Diurdi View Post
    Yes, altough it is very rare. There are usually substitutes that make it impossible to call the company a true monopoly. See Sirius XM, a former victim of anti-trust laws and alleged monopolist, who now dominates totally the satellite-radio market. However other kinds of radio (Internet radio, FM radio etc) and entertainment compete for the same customers, making it impossible to call Sirius XM a monopoly.

    In a free market an exceptional company can become a monopoly with close to 100% market share. However, this does not mean that they can abuse the position - there is always the threat of entry that means the company must keep their prices low and their products competetive or face an entrant grabbing market share. Companies today understand that attempting to achieve monopoly without government is bad for profits - instead they attempt to expand the overall market which leads to higher profits.

    A monopoly in a free market is not harmful, as to achieve such position they must provide their customers with such extraordinary products at such low price that no one else can achieve similar standards.
    This ^^

    Paypal for example is forced to stay lean by the small competitors that can easily knock them out such as google checkout (hell anyone on the internet not afraid of google is retarded). Myspace is a prime example of what happens to a company when they get complacent and don't pay attention to what other companies are up to. The list goes on and on of companies with extremely high market share who were quickly overtaken when they failed to notice their competition. Netscape (IE), GM (Foreign companies), Ford(Foreign companies), Blockbuster (Netflix), Circuit City (Best Buy), etc. So long as there is still someone striving to be the future giant company the consumer will get the best of all worlds. You will get high quality and economies of scale from the large company while maintaining the pressure of choice from the little guys.

    The only time it is possible for a monopoly to exist is for the government to create it.

    Oldie but goody.
    Last edited by dejavu22; 07-08-2011 at 11:48 PM.

  21. #18
    Quote Originally Posted by Romulus View Post
    I was just thinking about this... and look at the internet. We have Ebay/Paypal (same company after Ebay bought Paypal). I know there are smaller rivals, but they hardly can compete. The market has flocked to them and made them online kings, yes?
    Is the InterNet a product of "free markets"?
    Truth Drives Me

  22. #19
    Quote Originally Posted by Romulus View Post
    I was just thinking about this... and look at the internet. We have Ebay/Paypal (same company after Ebay bought Paypal). I know there are smaller rivals, but they hardly can compete. The market has flocked to them and made them online kings, yes?
    It depends on how "free" you are talking about. In a totally "free", law of the jungle atmosphere, it could happen. In a free market with a court system that protects property rights, no.
    Knowledge is Liberty!


  23. #20
    Law of the jungle is "might makes right", and is a part of egoism. Natural law is "do no harm", and is a part of anarchism, libertarianism, classical liberalism, neo-classical liberalism, and in effect utilitarianism (although they do not believe in natural law per se).

    A monopoly will exist more frequently in egoism, less so in anarchism and the like. A monopoly thrives in egoism (which is essentially statism), because it uses government force of law and guns, taxes and regulations, subsidies, and currency manipulations to drive out competition and maintain it's market share. A monopoly in a free market (a market without any regulation beyond harm, or the intention of it) cannot rely on such help from the government (it could exist, and be out of the markets), so it would have to simply be the best company that provides that good/service to the community. Essentially it would be a good company that was so efficient it drove all other companies out of business with low prices for a good product. The moment it tried to jack up prices or interrupt supplies, another competitor could simply start up and take up the slack. Maintaining this free market monopoly would mean keeping customers happy.

    Is a company having too much market share of an important resource dangerous? Sure, it could be. Especially if it were a food producer, let's say. But, how many food producers make enough food to hurt us? I mean if the egg monopoly goes belly up, who is hurt? I can live without eggs for a while, until a competitor steps in. Unless they made ALL the food, then it's a non sequitur. All industries are like this...no one has the internet monopolized, they have a trading site and a payment processor. If they went belly up, Amazon would step in, or w/e. Life would go on with a moderate interruption.

    However do I eat when the pizza shop goes bankrupt?

    I go to the Chinese food place.

    The free market, by it's unregulated nature, breeds a Division of Labor (specialization) so diverse and exact that crises like this are more likely in non-free markets where government laws and guns create misallocation of resources from the private industries that would otherwise spend it more productively and efficiently according to the profit motive. This leads to bubbles, and companies that get too much market share, or do not properly specialize into a proper economic niche, or both.

    The clearest problem with monopolies being formed isn't whether they are free or un-free markets (although free markets certainly have less occurrences), it's in what cycle of the economy. In downturns, the largest market share holders can grab more market share with less risk (and investment, hence our credit crunch and slow hiring practices) through a process called differential accumulation. Essentially, they wait out the small guy until they go bankrupt, and since it's a zero-sum game (the individual market), or at least growing slower than the rate of bankruptcies, the top market share holders need only play to beat the market (not maximize profit, like in a good economy) to accumulate a larger share and come out of the downturn monopolized (or at least with a much larger market share). This is a time where big guys get bigger and more centralized. Example: banks during the bailout process. This is why they got bigger, more centralized, not less when the bailouts occurred. It could only speed up the process to let their competitors go under, and keep them afloat with taxpayer's money to cover their losses. When you subsidize those with top market share in a downturn (or collapse), you essentially create monopolies. Stimulus works much the same way, if given to companies. The money cannot loosen credit markets, under a principle called monetary circuit theory, and it cannot spur hiring because of differential accumulation.

    I'll link you to an article I wrote on it:

    Why Stimulus Absolutely Cannot Work

    http://www.campaignforliberty.com/blog.php?view=38744



    So, I'd worry about un-free markets in a downturn most, then free markets in a downturn, then un-free markets in a normal economy or boom, then free markets in a normal economy or boom. That's my take on the threats of monopolies.
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  24. #21
    good discussion - thank you.. will add more to it soon.

  25. #22
    A company may have a large majority of market share, but a complete monopoly is impossible without the force of government guaranteeing it. And even then it's not totally realistic because black markets will likely form.

    Ebay and Paypal are no where near monopolies. There are hundreds of ways to fund online purchases other than paypal. And there are tons of auction sites other than Ebay.

    If I was going to sell something online I wouldn't use either because of the high commissions. I would probably start with craigslist.
    These kinds of monopolies, or in some cases trusts were rampant with monopolies and trusts in earlier eras, before Theodore Roosevelt began his campaign of trust-busting
    Last edited by Sam I am; 07-09-2011 at 12:46 PM.

  26. #23
    Quote Originally Posted by Romulus View Post
    I was just thinking about this... and look at the internet. We have Ebay/Paypal (same company after Ebay bought Paypal). I know there are smaller rivals, but they hardly can compete. The market has flocked to them and made them online kings, yes?
    I use online auctions all the time, only ever used ebay once, to buy a motor swap for my car. Big != monopoly, especially when anything I may want on ebay I can get elsewhere just as convieniently.

  27. #24
    the free market may lead an entrepreneur to develop a superior product and become a superior capitalist. monopolies do not usually continue forever in a free market
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  29. #25
    Quote Originally Posted by ProIndividual View Post
    Law of the jungle is "might makes right", and is a part of egoism. Natural law is "do no harm", and is a part of anarchism, libertarianism, classical liberalism, neo-classical liberalism, and in effect utilitarianism (although they do not believe in natural law per se).

    A monopoly will exist more frequently in egoism, less so in anarchism and the like. A monopoly thrives in egoism (which is essentially statism), because it uses government force of law and guns, taxes and regulations, subsidies, and currency manipulations to drive out competition and maintain it's market share. A monopoly in a free market (a market without any regulation beyond harm, or the intention of it) cannot rely on such help from the government (it could exist, and be out of the markets), so it would have to simply be the best company that provides that good/service to the community. Essentially it would be a good company that was so efficient it drove all other companies out of business with low prices for a good product. The moment it tried to jack up prices or interrupt supplies, another competitor could simply start up and take up the slack. Maintaining this free market monopoly would mean keeping customers happy.

    Is a company having too much market share of an important resource dangerous? Sure, it could be. Especially if it were a food producer, let's say. But, how many food producers make enough food to hurt us? I mean if the egg monopoly goes belly up, who is hurt? I can live without eggs for a while, until a competitor steps in. Unless they made ALL the food, then it's a non sequitur. All industries are like this...no one has the internet monopolized, they have a trading site and a payment processor. If they went belly up, Amazon would step in, or w/e. Life would go on with a moderate interruption.

    However do I eat when the pizza shop goes bankrupt?

    I go to the Chinese food place.

    The free market, by it's unregulated nature, breeds a Division of Labor (specialization) so diverse and exact that crises like this are more likely in non-free markets where government laws and guns create misallocation of resources from the private industries that would otherwise spend it more productively and efficiently according to the profit motive. This leads to bubbles, and companies that get too much market share, or do not properly specialize into a proper economic niche, or both.

    The clearest problem with monopolies being formed isn't whether they are free or un-free markets (although free markets certainly have less occurrences), it's in what cycle of the economy. In downturns, the largest market share holders can grab more market share with less risk (and investment, hence our credit crunch and slow hiring practices) through a process called differential accumulation. Essentially, they wait out the small guy until they go bankrupt, and since it's a zero-sum game (the individual market), or at least growing slower than the rate of bankruptcies, the top market share holders need only play to beat the market (not maximize profit, like in a good economy) to accumulate a larger share and come out of the downturn monopolized (or at least with a much larger market share). This is a time where big guys get bigger and more centralized. Example: banks during the bailout process. This is why they got bigger, more centralized, not less when the bailouts occurred. It could only speed up the process to let their competitors go under, and keep them afloat with taxpayer's money to cover their losses. When you subsidize those with top market share in a downturn (or collapse), you essentially create monopolies. Stimulus works much the same way, if given to companies. The money cannot loosen credit markets, under a principle called monetary circuit theory, and it cannot spur hiring because of differential accumulation.

    I'll link you to an article I wrote on it:

    Why Stimulus Absolutely Cannot Work

    http://www.campaignforliberty.com/blog.php?view=38744



    So, I'd worry about un-free markets in a downturn most, then free markets in a downturn, then un-free markets in a normal economy or boom, then free markets in a normal economy or boom. That's my take on the threats of monopolies.
    The Law of the Jungle is the original natural law, before some humans have attempted to change it.
    Knowledge is Liberty!


  30. #26
    In some cases, do free markets lead to crowning 1 industry giant/monoply ?

    In some cases it will happen. Take satellite radio for example. At the beginning there were two competing companies. Both weren't making much of a profit and merged to survive. No one else can really enter the market since there's not a huge demand for the product, plus it's ridiculously expensive to enter. So now there's one company that keeps charging higher prices for it's product, as the quality is going down. Basically a monopoly.
    Last edited by TheDrakeMan; 07-09-2011 at 03:33 PM.

  31. #27
    I don't really see ebay/paypal as a monopoly. They are dominant because they are good at what they do. But there are many alternatives and if/when they slip up others will gain more market share.

    Look at social media. Friendster was dominant, then MySpace, now Facebook. If Facebook $#@!s up or someone better takes their place people will switch. Same with Google.

    I am ok with government intervention in instances of "natural monopolies" such as power lines. But these are very few and far between.
    Ron Paul: "For those who have asked, I freely confess that Jesus Christ is my personal Savior, and that I seek His guidance in all that I do."

  32. #28
    Quote Originally Posted by TheDrakeMan View Post
    In some cases it will happen. Take satellite radio for example. At the beginning there were two competing companies. Both weren't making much of a profit and merged to survive. No one else can really enter the market since there's not a huge demand for the product, plus it's ridiculously expensive to enter. So now there's one company that keeps charging higher prices for it's product, as the quality is going down. Basically a monopoly.
    It's a monopoly if you consider the industry to be satellite radio. But I don't see them as a monopoly because they compete with terrestrial radio and iPods.
    Ron Paul: "For those who have asked, I freely confess that Jesus Christ is my personal Savior, and that I seek His guidance in all that I do."



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