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Pricing power is a better word that monopoly power in this case then, should have been more precise in wording. They arent price takers is the point. They have

Pricing power is a better word that monopoly power in this case then, should have been more precise in wording. They arent price takers is the point. They have price making power and a downward sloping demand curve until 50 bucks a barrel

clairity 7y ago
no, economists and policymakers agree with your usage of monopoly power. monopolies aren't simply a function of number of market participants. semantic digressions like these are non-sequiturs and should be ignored.
- vikramkr 7y ago
  I agree, and I'm basically trying to appease the hn crowd with the semantics. I didn't think my statement was controversial or incorrect enough to be hit with that many downvotes (I am an econ major - trying to balance layperson definitions with hyper technical ones) but clearly that ended up not being the case.
- thaumasiotes 7y ago
  > economists and policymakers agree with your usage of monopoly power Policymakers may; they'll agree with most definitions of a Bad Thing. Economists have to be more careful. Saying Saudi Arabia has monopoly power in the oil market because it produces oil at a lower cost than other suppliers is crazy. What power they have to manipulate the market doesn't come from what they're already doing -- it comes from what they could do. They have a marginal cost of production which is below the current market price. The fact that their average cost of production is below the current market price is not relevant. Consider a world where Arabia, Canada, Russia, and Venezuela all produce oil and sell it at the world price of $50 / barrel. In this world, Arabia's strategy is "pump all the oil we can sell at a profit". They have a marginal cost of production of $70 / barrel, above the market price, and an average cost of production of $20 / barrel, well below the market price. They're making money hand over fist. No one considers them to have monopoly power here. What would it mean? How would they exercise it? See e.g. The Concept of Monopoly and the Measurement of Monopoly Power ( https://sci-hub.tw/https://link.springer.com/chapter/10.1007/978-1-349-24002-9_4 https://sci-hub.tw/https://link.springer.com/chapter/10.1007... ), which would define Arabia's monopoly power in the hypothetical I've described as, on a scale from 0 to 1, negative 0.4. But again, profits are determined by average cost, not marginal cost. There is no reason to expect average cost to equal marginal cost.

clairity 7y ago

no, economists and policymakers agree with your usage of monopoly power. monopolies aren't simply a function of number of market participants. semantic digressions like these are non-sequiturs and should be ignored.

vikramkr 7y ago
I agree, and I'm basically trying to appease the hn crowd with the semantics. I didn't think my statement was controversial or incorrect enough to be hit with that many downvotes (I am an econ major - trying to balance layperson definitions with hyper technical ones) but clearly that ended up not being the case.
thaumasiotes 7y ago
> economists and policymakers agree with your usage of monopoly power Policymakers may; they'll agree with most definitions of a Bad Thing. Economists have to be more careful. Saying Saudi Arabia has monopoly power in the oil market because it produces oil at a lower cost than other suppliers is crazy. What power they have to manipulate the market doesn't come from what they're already doing -- it comes from what they could do. They have a marginal cost of production which is below the current market price. The fact that their average cost of production is below the current market price is not relevant. Consider a world where Arabia, Canada, Russia, and Venezuela all produce oil and sell it at the world price of $50 / barrel. In this world, Arabia's strategy is "pump all the oil we can sell at a profit". They have a marginal cost of production of $70 / barrel, above the market price, and an average cost of production of $20 / barrel, well below the market price. They're making money hand over fist. No one considers them to have monopoly power here. What would it mean? How would they exercise it? See e.g. The Concept of Monopoly and the Measurement of Monopoly Power ( https://sci-hub.tw/https://link.springer.com/chapter/10.1007/978-1-349-24002-9_4 https://sci-hub.tw/https://link.springer.com/chapter/10.1007... ), which would define Arabia's monopoly power in the hypothetical I've described as, on a scale from 0 to 1, negative 0.4. But again, profits are determined by average cost, not marginal cost. There is no reason to expect average cost to equal marginal cost.