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I would argue that with perfect unregulated competition, having more than one firm with a stable market share is a sign of INefficiency. Small differences will
by pervycreeper 11y ago
I would argue that with perfect unregulated competition, having more than one firm with a stable market share is a sign of INefficiency. Small differences will get magnified, and whoever has the small edge will completely dominate, assuming rational behavior.
- PKop 11y agoBut for how long? The market itself that the leading firms are competing in is dynamic and can change over time.
- 21echoes 11y agoassuming they offer precisely identical services...
- anigbrowl 11y agoMore likely there's a tendency towards a natural monopoly or duopoly, but markets can also exhibit chaotic behavior.
- no_wave 11y agoNot in the magic world of VC funding! There will always be at least one dominant firm and a few others setting tens of millions of dollars on fire by offering five dollar Lyft Lines in Manhattan hoping to get traction. It's a bit like restaurants - you have to compete both with established, profitable competitors and upstarts willing to take a temporary operating loss. It may be unsustainable, but I've gotten hundreds of dollars of discounted stuff from companies operating at a loss looking for traction... thanks, pension fund VC investors!
- marcoperaza 11y agoYou're assuming that different people have identical preferences. They don't. Some are more price-sensitive, while others are more interested in quality, which can itself be broken down into any number of specific factors about competing services. This is totally rational behavior, in the economic sense of the word.