4 ms·

Once drugs are not protected by patents, competition should reduce prices. Unless competition is not working because of price fixing or something else related.

kristopolous 7y ago
It's so much more lucrative to just slice the orphaned drug catalog up in a cartel structure. You charge robbery rates for drugs A, C and F and I'll take B, D and E. We both make lots of money and don't have to worry about each other. Competition assumes sellers don't collaborate and negotiate but they do all the time.
- cloverich 7y ago
  More pointedly competition only works when it exists.
braythwayt 7y ago
That's not how competition works. How do street drug dealers compete with each other? Not by lowering prices. No. They actually attempt to monopolize their territories by either eliminating or merging with their competitors, until a stable state is reached. They then set their prices to maximize margins and profits. This continues until something happens to destabilize the market, at which point there is some kind of struggle or even war, which stops when another stable state is reached by eliminating or merging the competitors. Without regulation to prevent the creation of monopolies and cartels, this happens in legitimate businesses just as much as street drug dealers. Competition by lowering price does happen, but when it does, it is part of the unstable phase that ends when another stable monopoly or cartel forms, at which point margins go right back up.
- frgtpsswrdlame 7y ago
  Very interesting perspective, what has informed it? I'd like to read more.
  - xattt 7y ago
    This is one model of free-market economies I hadn’t considered. Thank you for the mind shift!
- roenxi 7y ago
  > ... monopolize their territories by either eliminating or merging with ... The elimination part of that is important though. If companies were allowed to round up a group of the boys and go break some kneecaps when the boss didn't like something then it is true there won't be a lot of competition. But in civilised country that isn't an option. Nobody wants that level of deregulation - basic policing of physical safety is something of a given. People are somewhat protected by law in their attempts to compete.
  - braythwayt 7y ago
    Companies eliminate each other all the time. Maybe--and I only say maybe--physical assault of executives is not an option. But companies do things like dump product to drive a competitor bankrupt, and then raise their prices back up. After that happens a few times, people get the message that there is no money to be made competing with them. Or they play patent games and litigate the competition either out of business, or strongarm them into joining a patent cartel. The tools may be different, but without specific anti-monopoly and anti-cartel regulation that is enforced aggressively, companies will ruthlessly drive markets towards monopolies or cartels.

kristopolous 7y ago

It's so much more lucrative to just slice the orphaned drug catalog up in a cartel structure. You charge robbery rates for drugs A, C and F and I'll take B, D and E. We both make lots of money and don't have to worry about each other. Competition assumes sellers don't collaborate and negotiate but they do all the time.

cloverich 7y ago
More pointedly competition only works when it exists.

braythwayt 7y ago

That's not how competition works. How do street drug dealers compete with each other? Not by lowering prices. No. They actually attempt to monopolize their territories by either eliminating or merging with their competitors, until a stable state is reached. They then set their prices to maximize margins and profits. This continues until something happens to destabilize the market, at which point there is some kind of struggle or even war, which stops when another stable state is reached by eliminating or merging the competitors. Without regulation to prevent the creation of monopolies and cartels, this happens in legitimate businesses just as much as street drug dealers. Competition by lowering price does happen, but when it does, it is part of the unstable phase that ends when another stable monopoly or cartel forms, at which point margins go right back up.

frgtpsswrdlame 7y ago
Very interesting perspective, what has informed it? I'd like to read more.
- xattt 7y ago
  This is one model of free-market economies I hadn’t considered. Thank you for the mind shift!
roenxi 7y ago
> ... monopolize their territories by either eliminating or merging with ... The elimination part of that is important though. If companies were allowed to round up a group of the boys and go break some kneecaps when the boss didn't like something then it is true there won't be a lot of competition. But in civilised country that isn't an option. Nobody wants that level of deregulation - basic policing of physical safety is something of a given. People are somewhat protected by law in their attempts to compete.
- braythwayt 7y ago
  Companies eliminate each other all the time. Maybe--and I only say maybe--physical assault of executives is not an option. But companies do things like dump product to drive a competitor bankrupt, and then raise their prices back up. After that happens a few times, people get the message that there is no money to be made competing with them. Or they play patent games and litigate the competition either out of business, or strongarm them into joining a patent cartel. The tools may be different, but without specific anti-monopoly and anti-cartel regulation that is enforced aggressively, companies will ruthlessly drive markets towards monopolies or cartels.