4 ms·
This is not correct. You can deregulate the market completely and end in a worse place for consumers. The idea of "free market" giving the best outcome for buy
by goodpoint 5y ago
This is not correct. You can deregulate the market completely and end in a worse place for consumers.
The idea of "free market" giving the best outcome for buyers requires:
1) virtually infinite suppliers
2) virtually infinite customers
3) fully fungible product/service
4) fully rational and informed customers
In markets like ISP, real estate, water/electricity supply, wastewater/garbage/mail/roads the product or service is in no way fungible because is based on your location.
E.g. you cannot pay for an ISP in Germany and use it from San Francisco.
On top of that it's practically impossible to have a large numbers of suppliers in such markets.
Finally, providing mail/electricity/water/Internet to small and remote town is rarely profitable. You can have so-called "market failures" where market equilibrium does not serve customers at all, or at unaffordable prices.
This is why such services are provided by local governments in most countries or heavily regulated companies.
- goodpoint 5y agoReally? Silent downvotes for this?
- tacostakohashi 5y agoYour comment contains a number of erroneous assertions about requiring "infinite" suppliers/customers and products being "fungible". I am struggling to think of anything more fungible than electricity, and water, mail, and internet access follow closely. Rather, the reason that competition is problematic in these areas is because they are natural monopolies: https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Natural_monopoly
- goodpoint 5y agoWhat is not fungible is the service you are signing up for. As a home consumer you cannot switch from your current electricity provider to a cheaper one... that operates in a different continent. The link you provided is spot on and does not contradict in any way what I wrote. "Natural monopolies were recognized as potential sources of market failure as early as the 19th century" Another good page: https://en.wikipedia.org/wiki/Captive_market https://en.wikipedia.org/wiki/Captive_market