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> it's not totally infeasible that someone else could put in a competing water main In reality it is entirely unfeasible though. Because as soon as the competi

> it's not totally infeasible that someone else could put in a competing water main In reality it is entirely unfeasible though. Because as soon as the competition would start digging the incumbent simply lowers prices. The newcomer would need crazy and very rich investors to enter the market - the incumbent has a nice cache flow, which they can and do use to force you out. Unless you are Uber and investors are willing to pay for you to become the monopoly your suggestion won't work. Especially since if the goal simply was competition the margins would not be nearly good enough for such a kind of investment, which only makes sense if you yourself, the newcomer, strife to replace the old monopoly with yours.

ernst_klim 7y ago
>Because as soon as the competition would start digging the incumbent simply lowers prices. So the monopoly would have to keep the prices low all the time, since the competitors would appear all the time is the demand exist. It's not what monopolies do. Did Walmart lower the prices when Amazon appeared? Why to be a monopoly and not use this state of affairs to squeeze the profits?
AnthonyMouse 7y ago
> Because as soon as the competition would start digging the incumbent simply lowers prices. The solution to which is to get the customers to precommit to buying service from you for a sufficient period of time. If the incumbent is currently charging $300 and you offer a five year contract at $200 contingent on more than whatever threshold percentage of the customers signing up, and then only start digging when you reach that threshold, it no longer matters to you if the incumbent lowers prices because you have your customers locked in. And they're all happy to be paying $200 instead of $300. Or the neighbors can all get together and cosign a loan to pay to install the infrastructure in their neighborhood, which they then own and have no reason to ever patronize the incumbent again. What the incumbent would have to do to prevent that is start charging less immediately, before you spend a penny or sign up the threshold amount of customers, so that customers are no longer willing to do that. But then anyone can promise to do that at no cost and the incumbent has to charge competitive prices before there is any competition. Which they hate, which is why they lean hard on the government to interfere with any such attempts to compete with them, to remove the credibility from any such threats. > Especially since if the goal simply was competition the margins would not be nearly good enough for such a kind of investment, which only makes sense if you yourself, the newcomer, strife to replace the old monopoly with yours. Even that's making assumptions that don't necessarily hold. If the existing incumbent is charging $400 even though an efficient operator could charge $100, a new competitor that shows up to charge $200 even though they only have $100 in costs is making huge margins. And the incumbent slashing prices to bankrupt them only works if they can actually expect to do that. If the newcomer has more secure finances than the incumbent then all the incumbent does by slashing prices is bankrupt itself -- so they don't and you end up with both companies charging $200 instead of $400. Because that's more profitable to both of them than a price war that bankrupts one of them and causes the other to suffer big losses. And suffering those losses just to have a "monopoly" isn't worth very much if someone else can do the same thing to you as soon as you try to charge monopoly prices. Hence the strong desire to stifle competition with regulation.

ernst_klim 7y ago

>Because as soon as the competition would start digging the incumbent simply lowers prices. So the monopoly would have to keep the prices low all the time, since the competitors would appear all the time is the demand exist. It's not what monopolies do. Did Walmart lower the prices when Amazon appeared? Why to be a monopoly and not use this state of affairs to squeeze the profits?

AnthonyMouse 7y ago

> Because as soon as the competition would start digging the incumbent simply lowers prices. The solution to which is to get the customers to precommit to buying service from you for a sufficient period of time. If the incumbent is currently charging $300 and you offer a five year contract at $200 contingent on more than whatever threshold percentage of the customers signing up, and then only start digging when you reach that threshold, it no longer matters to you if the incumbent lowers prices because you have your customers locked in. And they're all happy to be paying $200 instead of $300. Or the neighbors can all get together and cosign a loan to pay to install the infrastructure in their neighborhood, which they then own and have no reason to ever patronize the incumbent again. What the incumbent would have to do to prevent that is start charging less immediately, before you spend a penny or sign up the threshold amount of customers, so that customers are no longer willing to do that. But then anyone can promise to do that at no cost and the incumbent has to charge competitive prices before there is any competition. Which they hate, which is why they lean hard on the government to interfere with any such attempts to compete with them, to remove the credibility from any such threats. > Especially since if the goal simply was competition the margins would not be nearly good enough for such a kind of investment, which only makes sense if you yourself, the newcomer, strife to replace the old monopoly with yours. Even that's making assumptions that don't necessarily hold. If the existing incumbent is charging $400 even though an efficient operator could charge $100, a new competitor that shows up to charge $200 even though they only have $100 in costs is making huge margins. And the incumbent slashing prices to bankrupt them only works if they can actually expect to do that. If the newcomer has more secure finances than the incumbent then all the incumbent does by slashing prices is bankrupt itself -- so they don't and you end up with both companies charging $200 instead of $400. Because that's more profitable to both of them than a price war that bankrupts one of them and causes the other to suffer big losses. And suffering those losses just to have a "monopoly" isn't worth very much if someone else can do the same thing to you as soon as you try to charge monopoly prices. Hence the strong desire to stifle competition with regulation.