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A monopoly doesn't mean there are no alternatives. It means that the process of competitive undercutting of prices does not operate. Consider a price fixing car

A monopoly doesn't mean there are no alternatives. It means that the process of competitive undercutting of prices does not operate. Consider a price fixing cartel. There are alternative products, but it is still a monopoly. I didn't explain the example I used very well. In the case you mention: renting an apartment, there are indeed always alternative locations. However, that does not mean the market is competitive. The key difference is that from your perspective, these bits of land are equivalent, but from other people's perspective, they are not. One of those locations that you may consider to be nothing special may be another person's number one choice because it's close to something they value, which you don't care about. That could be friends, family, work, amenities, businesses that your business depends on, raw materials, transport links, etc, etc. Each buyer has unique needs and each location has a unique set of things it's close to. That means that the seller/landlord does not need to bother attempting to attract your business in a competitive way as this other person for whom that location is their best option (and likely others too) will already have approached them. In effect, each unique location is an auction, with a different group of buyers interested (at different prices) each time. This only happens because land doesn't move. If it did move, then the locations would not be unique and the market would work more as you imply it would. The outcome is that each piece of land is sold based on the highest bid offered by any buyer. A characteristic of a monopoly. This is the opposite of a free market, where things are sold as a result of the lowest price offered by any seller.

jessriedel 9y ago
I'm happy to agree that "all sellers in a market perfectly coordinate on price" is functionally equivalent to "there is only one seller in the market", and that this qualifies as a monopoly. My comment doesn't hinge on that obvious point. (Indeed I said "alternatives from another seller", not just "alternatives", and it's pretty clear that nothing changes if all the sellers perfectly coordinate as one.) Your explanation doesn't save your example. It will always be the case that, for any given buyer in a non-commodity market, one choice is better than all the other. (If the products are not identical, one will essentially always be at least a bit better than the others for some reason.) However, this doesn't approach a monopoly except as the alternatives become arbitrarily bad in comparison (i.e., do not function as substitutes). Yes, in this limit, it's a monopoly, but this is almost never the case. Your remaining comments imply that anything sold at auction is a monopoly and not a free market. You also incorrectly ascribe this to lack of mobility: > In effect, each unique location is an auction, with a different group of buyers interested (at different prices) each time. This only happens because land doesn't move. Art, used cars, items on eBay, etc., are all products that move (unlike land) yet "each...is an auction, with a different group of buyers interested (at different prices) each time". Again: the key mistake is that you are conflating all non-commodities as monopolies.

jessriedel 9y ago

I'm happy to agree that "all sellers in a market perfectly coordinate on price" is functionally equivalent to "there is only one seller in the market", and that this qualifies as a monopoly. My comment doesn't hinge on that obvious point. (Indeed I said "alternatives from another seller", not just "alternatives", and it's pretty clear that nothing changes if all the sellers perfectly coordinate as one.) Your explanation doesn't save your example. It will always be the case that, for any given buyer in a non-commodity market, one choice is better than all the other. (If the products are not identical, one will essentially always be at least a bit better than the others for some reason.) However, this doesn't approach a monopoly except as the alternatives become arbitrarily bad in comparison (i.e., do not function as substitutes). Yes, in this limit, it's a monopoly, but this is almost never the case. Your remaining comments imply that anything sold at auction is a monopoly and not a free market. You also incorrectly ascribe this to lack of mobility: > In effect, each unique location is an auction, with a different group of buyers interested (at different prices) each time. This only happens because land doesn't move. Art, used cars, items on eBay, etc., are all products that move (unlike land) yet "each...is an auction, with a different group of buyers interested (at different prices) each time". Again: the key mistake is that you are conflating all non-commodities as monopolies.