3 ms·

Monopolies are bad but "perfect competition only exists at the point of collapse" [1] A benevolent monopoly can be OK but both of the extremes of competition c

Monopolies are bad but "perfect competition only exists at the point of collapse" [1] A benevolent monopoly can be OK but both of the extremes of competition come with instability. [1] I put that in quotes because I thought it was a famous well-known quote but I can't find the original!

ghthor 9y ago
I think the 51% attack of bitcoin is a similar phenomenon. If someone owns 51% of the market, trust from outsiders/customers is basically destroyed. At that point the dominate player can systematicly destroy the competition through pure economic power.
AnthonyMouse 9y ago
And excessive competition creates stagnation at local maxima. If you're engaged in a price war you have no profits to invest in R&D. One of the things that works really well for this is to split monolithic national regulatory codes into less complicated region-specific ones. California needs earthquake rules, Florida needs hurricane rules, Colorado needs altitude rules, etc. If you have one national code containing all the rules, you give the advantage to huge conglomerates that can navigate them all at the same time. A small company in Colorado has to comply with all the irrelevant rules covering earthquakes and hurricanes, which puts them out of business. But if they each have only their own regulations, smaller companies can survive the ones in their home state -- and have more power there to address them if they're oppressive. So you get a different company in each region instead of one big national one. They put competitive pressure on each other because any who charged too much would make it worth it for one of the others to pay the regulatory cost of expanding into that region, but not so much pressure that everyone is locked in a price war and no one has any surplus to invest in the future.

3 ms·

Monopolies are bad but "perfect competition only exists at the point of collapse" [1] A benevolent monopoly can be OK but both of the extremes of competition c

by emmelaich 9y ago

ghthor 9y ago
I think the 51% attack of bitcoin is a similar phenomenon. If someone owns 51% of the market, trust from outsiders/customers is basically destroyed. At that point the dominate player can systematicly destroy the competition through pure economic power.
AnthonyMouse 9y ago
And excessive competition creates stagnation at local maxima. If you're engaged in a price war you have no profits to invest in R&D. One of the things that works really well for this is to split monolithic national regulatory codes into less complicated region-specific ones. California needs earthquake rules, Florida needs hurricane rules, Colorado needs altitude rules, etc. If you have one national code containing all the rules, you give the advantage to huge conglomerates that can navigate them all at the same time. A small company in Colorado has to comply with all the irrelevant rules covering earthquakes and hurricanes, which puts them out of business. But if they each have only their own regulations, smaller companies can survive the ones in their home state -- and have more power there to address them if they're oppressive. So you get a different company in each region instead of one big national one. They put competitive pressure on each other because any who charged too much would make it worth it for one of the others to pay the regulatory cost of expanding into that region, but not so much pressure that everyone is locked in a price war and no one has any surplus to invest in the future.