Lol THOSE are the only two reasons monopolies form?

What if the regulatory system itself is simply inadequate, no bribes needed?

Commander Cool is the sanest person Webdiplomacy so far

I agree with tolstoy, (I didn't remember you being a right winger like me).

I think the easiest examples of new modern monopolies are facebook and google. Facebook is essentially a monopoly on social networking. Now facebook isn't a complete monopoly, but competitors (google plus) have tried to enter the market. Was googles, failure to compete with Facebook because of too little or too much regulation? Or was it simply that people preferred Facebook?

The fact of the matter is 6 years earlier Facebook was competing, and losing, to myspace for the social networking market. Facebook won and deserved the monetary gain that resulted from that victory (Zuckerberg being the youngest billionaire in history). We shouldn't punish Zuckerberg for the innovation, creativity and success that he had with his product, and we don't need to regulate facebook in anyway.

Lets say facebook, being the monopoly that it is, decides that its advertisement revenues are too small, so they decide to start having people pay if they want an account, then people who don't want to pay would leave, google plus would probably get a lot of new members.

This is the reality of the monopoly that Schumpeter described. If a monopoly becomes too inefficient, or raises its prices by too much, then a different entrepreneur will enter the market an start competing with said monopoly, with a competitive advantage of a lower price or more efficiency.

I cannot think of a monopoly arising because of too little regulation because in a genuine free market the only way to make a profit is to sell a product that consumers are willing to pay more for, then the costs associated with producing said product. If you gain a monopoly because your selling a product that consumers want at a fair price, then there is no need to regulate you, and as long as there is no regulation, there is only one other way to create a monopoly.

The only other way to create a monopoly is to invent a new product and be the only person selling it. At the start up you will have a monopoly on that product, but if consumers want it enough and your profitable, then people will start competing against you.

In this exact case the only way to maintain your monopoly is if you have patents or copy right regarding this product. In this case your monopoly is the direct result of regulations preventing people from competing with you.

The final way to create a monopoly is to buy out all of your competitors, the problem with this is that to do this you will have to buy your competitors for more money then they are worth, meaning that this decision will actually cost you money, not make you money, and as long as there are no barriers to entry, if you start becoming too inefficient or charging too much, then more competitors will arise, meaning that in a genuine free market, this monopoly strategy would actually bankrupt the monopoly.

http://www.youtube.com/watch?v=eO8ZU7TeKPw

My keyboard thanks you, Fasces, for typing all that out so I don't have to. ;-)

As for wings, I am a Libertarian... whether that makes me 'right' or 'left' is entirely a matter of perspective.

I'm almost a libertarian, the area I disagree with you guys the most on is how draug put it, how to get there.

I would rather a dictatorship enforcing libertarianism, then a democracy where people can vote on whether or not to be libertarian, simply as a means to get a genuine free market out there.

I consider libertarians to be right wing.

I would rather a dictatorship enforcing communism, then a democracy where people can vote on whether or not to be communist.

See how irritated you are when you read that? And you think I'm a giant idiot for typing it? That's how 90% of people will feel when they read what you just wrote, Fasces.

Tolstoy, those are not the only two ways monopolies may form. New forms of vertical integration are excellent ways to control a market. By purchasing the means of advertisement, aka by owning media outlets, companies are able to control the dissemination of knowledge, promoting certain products while neglecting others. People can't buy what they don't know about.

And we cannot ignore the power of symbols and name recognition. Do you really think it is feasible to compete in the national cola market? Even if I produced an excellent product and could supply it at a nominal cost to my customers, I could never compete with the likes of Pepsi and Coke (a diapoly) because they have turned their product into a social norm. Humans a creatures of habit and custom. This factor as well, for better or worse, can help in the construction of monopolies.

Additionally, one my create a monopoly simply buy buying all of the means to produce a product. If I buy all the diamond mines I have a monopoly on diamonds (Aka De Beers), and it has nothing to do with my ability to supply products at such a low affordable price that no one can compete. This is what happens with goods for which the means of production require vast amounts of capital just to start up.

So really. There are many ways a monopoly may form. Certainly more than two...

" If I buy all the diamond mines I have a monopoly on diamonds (Aka De Beers), "
Da Beers only formed their monopoly because they bribed the South African government because they passed a law giving Da Beers exclusive right to all diamond mining inside their country.

Never in history has a company gotten exclusive access to a resource unless a government has helped them acquire it. As I have said Schumpeter explained this well, explaining that if someone is making money and attempts to acquire all of one resource, others will start buying it up as well knowing full well that they could make a lot of money in it, either buy being bought out by the monopoly (making them know they can sell their mine for way more then its worth) or by competing with the monopoly.

I already addressed every different way a monopoly could form, all of which fall into 2 categories, the ones tolstoy provided.

There is a third way a would be monopolist could get their monopoly... By selling at a loss and forcing their smaller competition out of business.

That has never worked in the long run draug. Since once they jack up their prices competitors start up.

Despite popular belief, Walmart didn't really do it, yes they sold their goods lower then anyone else, but they were still making profits, and they actually made more profits then their competitors because more people bought from them.

This was in my recommended videos on youtube, thought it would be rather fitting for talking about monopolies:
http://www.youtube.com/watch?v=tdLBzfFGFQU

Well, it can work with products like diamonds as they are not manufactured and are in much more limited supply, so driving the competition out of business then buying up their excess inventory gives the big guy an effective monopoly.

As I already stated, the only reason Da Beers has a monopoly on Diamonds is because both the South African and Russian governments passed legislation granting them one.

There has never been a case in history where a monopoly has risen from a free market and has been able to remain a monopoly unless a government has passed laws preventing competition from arising.

That's because in every monopoly case in the free market that didn't last, the government stepped in and broke it up. Ma Bell comes to mind. It would still have the stranglehold it has had the US government not broken it up.

And my use of diamonds wasn't intended to explain DeBeers, It was just a monopolizable product of limited availability that couldn't be manufactured. Could have been any precious gemstone (natural sapphires come to mind) or even something like elephant ivory (you know only antique ivory is sellable now, right?)

" Ma Bell comes to mind. It would still have the stranglehold it has had the US government not broken it up."

Ma Bell never would've gained its stranglehold without government giving it to them in the first place. From Wikipedia:

"In 1934, the government set AT&T up as a regulated monopoly under the jurisdiction of the Federal Communications Commission, in the Communications Act of 1934.
As a result, by 1940 the Bell System effectively owned most telephone service in the United States, from local and long-distance service to the telephones themselves. This allowed Bell to prohibit their customers from connecting phones not made or sold by Bell to the system without paying fees. For example, if a customer desired a type of phone not leased by the local Bell monopoly, he or she had to purchase the phone at cost, give it to the phone company, then pay a 're-wiring' charge and a monthly lease fee in order to use it."

As for diamonds, GE actually came up with a process to create artificial diamonds as a way of circumventing the (as Fasces points out, government-designated) De Beers monopoly.

The only examples of a monopoly in the US that was gained entirely by the free market, was standard oil, when it gained its monopoly in 1870, the price of oil was 30 cents per gallon, when the monopoly was broken up in 1911, the price of oil (in 1870 dollars) was 5.9 cents per gallon. I wonder why the monopoly ended up lowering the cost of oil, not increasing it. Could it be because the economy of scale meant that they could compete with lower expenses then their competitors, lower expenses meant lower prices, and they never were able to raise the price of oil, because if they did then a competitor would rise up and take their market share?

I guess in a free market, monopolies still have listen to the invisible hands guiding laws of supply and demand and the forces of competition.