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You're describing a "race to the bottom" those 2 competing producers would participate in. But we all know that when there's a quasi-monopoly with only 2/3 big

by vmarsy 9y ago

You're describing a "race to the bottom" those 2 competing producers would participate in. But we all know that when there's a quasi-monopoly with only 2/3 big players, they would "cooperate" to maintain the high prices. Phone providers are a good example of this: In France for many years there was phone providers with extremely high prices: 50, 60, or even 70 euros per month for unlimited plans. They were all telling how their prices were fair, that they need infrastructure investments, etc etc. Then came a disrupting player: 'Free', who started charging 20 euros per month for the unlimited plans. Immediately, the 3 other players started offering 20-25 euros unlimited plans as well. The infrastructure hasn't suffered from this, 4G came as expected, and Free is now one of the major players. What would happen in your example, is, unless a 'Free' equivalent shows up, is that they would all charge something around $19.

Nav_Panel 9y ago
> But we all know that when there's a quasi-monopoly with only 2/3 big players, they would "cooperate" to maintain the high prices. > In France for many years there was phone providers with extremely high prices It's a lot easier to spin up a new taxi app that undercuts Uber/Lyft than it is to build new telecom infrastructure. Nothing's stopping Newber from showing up with a shiny new app and undercutting both, if consumers are upset enough.
BurningFrog 9y ago
Not a big fan of the "but we all know that..." argument by anecdote. Economists have studied this stuff extensively for a very long time, and their consensus is that normally markets are quite effective at keeping prices down, as long as they're kept open. There are certainly exceptions and corner cases where it works differently, but that is what they are.
- vmarsy 9y ago
  You're right the telecom has this particularity of not being a "open market" with these big government regulations and bids for frequencies etc. As the sibling comment points out : "Nothing's stopping Newber from showing up with a shiny new app and undercutting both". As long as this statement stays true (i.e Lyft/Uber don't abuse their dominant position to prevent competitors to enter the market), then the market should be healthy. I'm not convinced they would though.

by vmarsy 9y ago

Nav_Panel 9y ago

> But we all know that when there's a quasi-monopoly with only 2/3 big players, they would "cooperate" to maintain the high prices. > In France for many years there was phone providers with extremely high prices It's a lot easier to spin up a new taxi app that undercuts Uber/Lyft than it is to build new telecom infrastructure. Nothing's stopping Newber from showing up with a shiny new app and undercutting both, if consumers are upset enough.

BurningFrog 9y ago

Not a big fan of the "but we all know that..." argument by anecdote. Economists have studied this stuff extensively for a very long time, and their consensus is that normally markets are quite effective at keeping prices down, as long as they're kept open. There are certainly exceptions and corner cases where it works differently, but that is what they are.

vmarsy 9y ago
You're right the telecom has this particularity of not being a "open market" with these big government regulations and bids for frequencies etc. As the sibling comment points out : "Nothing's stopping Newber from showing up with a shiny new app and undercutting both". As long as this statement stays true (i.e Lyft/Uber don't abuse their dominant position to prevent competitors to enter the market), then the market should be healthy. I'm not convinced they would though.