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If the cost to enter the market is very high a monoply can portect itself simply by there being implicit knowldege that a competitor entering the market will re
by FloatingVertex 8y ago
If the cost to enter the market is very high a monoply can portect itself simply by there being implicit knowldege that a competitor entering the market will result in the monopoly lowering their prices temorairly. With a high cost to enter + high risk of failure + low returns even if the monopoly is broken, a monopoly can protect itself effectively without the help of a state.
- logfromblammo 8y agoThe entry of a new competitor could also cause both the incumbent monopolist and the challenger to fail, if the monopolist hasn't kept a deep enough war chest filled, for weathering such challenges. But why keep a war chest, when you could use the same funds to greater effect by buying political protection and distributing the remainder to the owners? While it is possible to effectively protect a monopoly without help, appropriating the machinery of the state where possible is much more efficient. As I mentioned previously, where the state cannot be used, the company could hire a gang to burn down competitor capital more cheaply than trying to duke it out in a fair fight on the open market. If you're DeBeers, and someone opens a diamond mine that threatens your cartel in a place with little law enforcement, your carrot is a buyout offer, and your stick is murdering key personnel and destroying vital equipment using "security contractors". You don't need to lower prices, if you can make the new guy go bankrupt without ever bringing anything to market.