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Monopolies are inherently bad because not being subject to competitive forces means they can charge what the market can bear, rather than the rate set by compet

by chiaro 9y ago

Monopolies are inherently bad because not being subject to competitive forces means they can charge what the market can bear, rather than the rate set by competition. This is bad for the consumer, bad for competition, and bad for the economy (fewer people are making transactions than at the market clearing price, slowing down economic growth). If that makes you sound like a libertarian it speaks poorly to their general economic literacy. On the flip side, Tesla is also treated a lot better than smaller competitors, because its size enables it to play states off against each other: https://en.wikipedia.org/wiki/Gigafactory_1#State_competition_and_incentives https://en.wikipedia.org/wiki/Gigafactory_1#State_competitio...

brownbat 9y ago
> Monopolies are inherently bad Yeah but is Tesla a tiny car company or a monopoly electric car company?
- chiaro 9y ago
  It's neither? It has more market power than, say, Chevrolet, but less than AT&T. Receiving ~1.25Bn from the taxpayer where smaller companies wouldn't get anything is more a function of its size and institutional failure on behalf of the individual states.
  - maxxxxx 9y ago
    I don't think Tesla is anywhere close to market dominance. Their problem may be more long-term survival than achieving a monopoly in my view.
    - chiaro 9y ago
      They are leading in the niche, but that's besides the point: market power refers to the ability to raise prices above what is truly competitive, which they certainly have to some extent while not being a monopoly.
      - jdmichal 9y ago
        > ... market power refers to the ability to raise prices above what is truly competitive, which they certainly have to some extent while not being a monopoly. Have they really, though? I mean, a Maserati is also priced very highly. Certainly much higher than what is "truly competitive" for a luxury vehicle. But I don't think anyone would call them a monopoly. Likewise, Tesla is selling a unique product within a class, and some people are willing to pay more for that product. In other words, they have a product with a competitive advantage, and that allows them to price higher than the competition. This is healthy and normal elastic demand. I mean, price was a big reason the Model 3 presold in a week about three times the entire Model S volume.
        chiaro 9y ago
        The typical argument in that favour is that a product comes with certain intangible benefits, be it social signalling or personal actualisation that helps explain why firms with strong brand identity can push higher margins in otherwise competitive markets. This is a partial explanation to the extent that it doesn't play nicely with another prevailing theory that mindshare and niche dominance enables market power through greater information asymmetry. The presence of a larger car market curtails how market power can be exercised, to the extent that your hydrocarbon cars are substitute goods for electric ones. I have no real issue with Tesla from a competitive perspective. I'm simply making two fairly seperate points, that monopolies are always bad, and Tesla has accrued many more benefits from the state than penalties, on account of its size.
      - maxxxxx 9y ago
        They created a little niche in large market but it's pretty easy to avoid them if you don't like their cars.
- brownbat 9y ago
  I'm just saying determination of market is hard, it is responsible for endless arguments in trade and tax law. I used to think we should have a form of progressive taxation based on market power. Incent, but do not mandate, smaller firms. Tax anticompetitive potential to siphon rents. I still like the theory but now worry it would be unmanageable because market determination is an unsolved problem.
thephyber 9y ago
> Monopolies are inherently bad because not being subject to competitive forces Some companies are a "monopoly" in a small sector, but there are substitute products which are close enough to provide market-like forces. Don't want to pay for a Tesla? Buy an internal-combustion engine car, a gas-electric hybrid car, pay a premium for a Fisker Kharma, get one of the less desirable tiny electrics from any one of a dozen tiny-production manufacturers, or simply buy a Tesla used. If Tesla was a monopoly, they could (would?) charge far more now than they are for the early delivery units (time-price discrimination). As far as I can tell, they have biased early delivery Model 3 cars to premium features, but they are charging the same price in delivery month 1 than delivery month 3. > If that makes you sound like a libertarian it speaks poorly to their general economic literacy. I'm reasonably well versed on the basics of economics (both classical and behavioral). "Libertarian" comes with a connotation, which I don't prefer to adopt. Some of it comes from Ayn Rand acolytes, some from the ignorance/naiveté of AnCaps (although I admit that there's enough ignorance on all sides of economics). But more extreme libertarians tend to think that the market will correct itself faster and better than any government intervention, so "monopolies don't exist for long in free-market conditions" (although this assumes perfect information transparency, which never has and never will exist). > On the flip side, Tesla is also treated a lot better than smaller competitors, because its size enables it to play states off against each other Every big company that has already raised the funds (or promise of funds) can get similar attention and courting when shopping for a cite for jobs. It's not unique to Tesla, or even large companies: * Amazon is shopping with HQ2 to major metro areas * Google Fiber had cities put together competitive bids, including cutting red tape and cheap access to utility poles * Wisconsin just offered a *massive* tax discount package to woo FoxConn to build a factory in the US * Almost *every* auto manufacturer gets courted by different states to build plants (incl. Toyota, Nissan, Mazda, etc) in Tennessee, Kentucky, Georgia, South Carolina, Mississippi, and Alabama * Boeing gets many bids on their plants and Airbus recently got similar incentives for building a plant in Alabama * The Kansas Cities (two adjacent cities in two states) have long been at economic war, offering unsustainable tax incentives to keep companies from "crossing the street" into another tax jurisdiction[1] * Video Effects ("VFX") is in a tax-free treadmill[2] [1] https://www.economist.com/news/united-states/21599368-missouri-calls-economic-truce-kansas-new-border-war https://www.economist.com/news/united-states/21599368-missou... [2] http://www.studiodaily.com/2013/04/ending-the-vfx-crisis-what-has-to-happen/ http://www.studiodaily.com/2013/04/ending-the-vfx-crisis-wha...

by chiaro 9y ago

brownbat 9y ago

> Monopolies are inherently bad Yeah but is Tesla a tiny car company or a monopoly electric car company?

chiaro 9y ago
It's neither? It has more market power than, say, Chevrolet, but less than AT&T. Receiving ~1.25Bn from the taxpayer where smaller companies wouldn't get anything is more a function of its size and institutional failure on behalf of the individual states.
- maxxxxx 9y ago
  I don't think Tesla is anywhere close to market dominance. Their problem may be more long-term survival than achieving a monopoly in my view.
  - chiaro 9y ago
    They are leading in the niche, but that's besides the point: market power refers to the ability to raise prices above what is truly competitive, which they certainly have to some extent while not being a monopoly.
    - jdmichal 9y ago
      > ... market power refers to the ability to raise prices above what is truly competitive, which they certainly have to some extent while not being a monopoly. Have they really, though? I mean, a Maserati is also priced very highly. Certainly much higher than what is "truly competitive" for a luxury vehicle. But I don't think anyone would call them a monopoly. Likewise, Tesla is selling a unique product within a class, and some people are willing to pay more for that product. In other words, they have a product with a competitive advantage, and that allows them to price higher than the competition. This is healthy and normal elastic demand. I mean, price was a big reason the Model 3 presold in a week about three times the entire Model S volume.
      - chiaro 9y ago
        The typical argument in that favour is that a product comes with certain intangible benefits, be it social signalling or personal actualisation that helps explain why firms with strong brand identity can push higher margins in otherwise competitive markets. This is a partial explanation to the extent that it doesn't play nicely with another prevailing theory that mindshare and niche dominance enables market power through greater information asymmetry. The presence of a larger car market curtails how market power can be exercised, to the extent that your hydrocarbon cars are substitute goods for electric ones. I have no real issue with Tesla from a competitive perspective. I'm simply making two fairly seperate points, that monopolies are always bad, and Tesla has accrued many more benefits from the state than penalties, on account of its size.
    - maxxxxx 9y ago
      They created a little niche in large market but it's pretty easy to avoid them if you don't like their cars.
brownbat 9y ago
I'm just saying determination of market is hard, it is responsible for endless arguments in trade and tax law. I used to think we should have a form of progressive taxation based on market power. Incent, but do not mandate, smaller firms. Tax anticompetitive potential to siphon rents. I still like the theory but now worry it would be unmanageable because market determination is an unsolved problem.

thephyber 9y ago

> Monopolies are inherently bad because not being subject to competitive forces Some companies are a "monopoly" in a small sector, but there are substitute products which are close enough to provide market-like forces. Don't want to pay for a Tesla? Buy an internal-combustion engine car, a gas-electric hybrid car, pay a premium for a Fisker Kharma, get one of the less desirable tiny electrics from any one of a dozen tiny-production manufacturers, or simply buy a Tesla used. If Tesla was a monopoly, they could (would?) charge far more now than they are for the early delivery units (time-price discrimination). As far as I can tell, they have biased early delivery Model 3 cars to premium features, but they are charging the same price in delivery month 1 than delivery month 3. > If that makes you sound like a libertarian it speaks poorly to their general economic literacy. I'm reasonably well versed on the basics of economics (both classical and behavioral). "Libertarian" comes with a connotation, which I don't prefer to adopt. Some of it comes from Ayn Rand acolytes, some from the ignorance/naiveté of AnCaps (although I admit that there's enough ignorance on all sides of economics). But more extreme libertarians tend to think that the market will correct itself faster and better than any government intervention, so "monopolies don't exist for long in free-market conditions" (although this assumes perfect information transparency, which never has and never will exist). > On the flip side, Tesla is also treated a lot better than smaller competitors, because its size enables it to play states off against each other Every big company that has already raised the funds (or promise of funds) can get similar attention and courting when shopping for a cite for jobs. It's not unique to Tesla, or even large companies: * Amazon is shopping with HQ2 to major metro areas * Google Fiber had cities put together competitive bids, including cutting red tape and cheap access to utility poles * Wisconsin just offered a *massive* tax discount package to woo FoxConn to build a factory in the US * Almost *every* auto manufacturer gets courted by different states to build plants (incl. Toyota, Nissan, Mazda, etc) in Tennessee, Kentucky, Georgia, South Carolina, Mississippi, and Alabama * Boeing gets many bids on their plants and Airbus recently got similar incentives for building a plant in Alabama * The Kansas Cities (two adjacent cities in two states) have long been at economic war, offering unsustainable tax incentives to keep companies from "crossing the street" into another tax jurisdiction[1] * Video Effects ("VFX") is in a tax-free treadmill[2] [1] https://www.economist.com/news/united-states/21599368-missouri-calls-economic-truce-kansas-new-border-war https://www.economist.com/news/united-states/21599368-missou... [2] http://www.studiodaily.com/2013/04/ending-the-vfx-crisis-what-has-to-happen/ http://www.studiodaily.com/2013/04/ending-the-vfx-crisis-wha...