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https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Natural_monopoly

AnthonyMouse 5y ago
This tech stuff isn't a natural monopoly. The defining characteristic of a natural monopoly is that customer is paying a large amount per unit to cover costs that stay the same no matter the amount of usage. The per-unit cost for most of this tech stuff is approximately zero, and the ones that aren't zero (e.g. semiconductor manufacturing) have significant unit production costs and are not a natural monopoly either. It's also questionable whether even "natural monopolies" would be monopolies absent regulation. It's more efficient to have a single power grid, but if there was no law granting a statutory monopoly to a single provider and the existing provider became abusive, somebody would build a parallel power grid. Because having two would cost twice as much as having one, but that's still less than paying five times as much to an unrestrained monopolist. So the result of unregulated "natural monopoly" still isn't a monopoly, it's just competition which is unusually inefficient.
- mrep 5y ago
  I would argue it basically is because the high fixed costs are from paying the developers to write and maintain good competitive software and the marginal cost of each new user is basically free. That exactly matches wiki: "A natural monopoly has a high fixed cost for a product that does not depend on output, but its marginal cost of producing one more good is roughly constant, and small."
  - AnthonyMouse 5y ago
    The traditional definition wasn't really contemplating software, because the important thing that makes it a natural monopoly is that building a second one would cause the user to have to pay a lot more. If you have one power grid, it costs a billion dollars to operate, so the average user has to pay $1B/N where N is the number of users on the grid. If you have two power grids, now the average user has to pay $2B/N, which is twice as much, and most importantly, is a large difference. With software, there are so many users that the difference between $X/N and $2X/N is still ~zero. You can have two providers, or ten, and you're in no danger of them being unable to recover their development costs even at low prices. The cost of paying a number that rounds to zero twice is well worth the benefits of competition. In other words, the barriers to entry are low (absent some artificial constraint). It isn't that the fixed costs are high, they're only "high" relative to the essentially non-existent unit cost. That's totally different. It means that if you want to enter the market for email clients or messaging apps or phone games, that can be done by an individual or a small business. A small business can't build their own power grid.

This tech stuff isn't a natural monopoly. The defining characteristic of a natural monopoly is that customer is paying a large amount per unit to cover costs that stay the same no matter the amount of usage. The per-unit cost for most of this tech stuff is approximately zero, and the ones that aren't zero (e.g. semiconductor manufacturing) have significant unit production costs and are not a natural monopoly either. It's also questionable whether even "natural monopolies" would be monopolies absent regulation. It's more efficient to have a single power grid, but if there was no law granting a statutory monopoly to a single provider and the existing provider became abusive, somebody would build a parallel power grid. Because having two would cost twice as much as having one, but that's still less than paying five times as much to an unrestrained monopolist. So the result of unregulated "natural monopoly" still isn't a monopoly, it's just competition which is unusually inefficient.

mrep 5y ago
I would argue it basically is because the high fixed costs are from paying the developers to write and maintain good competitive software and the marginal cost of each new user is basically free. That exactly matches wiki: "A natural monopoly has a high fixed cost for a product that does not depend on output, but its marginal cost of producing one more good is roughly constant, and small."
- AnthonyMouse 5y ago
  The traditional definition wasn't really contemplating software, because the important thing that makes it a natural monopoly is that building a second one would cause the user to have to pay a lot more. If you have one power grid, it costs a billion dollars to operate, so the average user has to pay $1B/N where N is the number of users on the grid. If you have two power grids, now the average user has to pay $2B/N, which is twice as much, and most importantly, is a large difference. With software, there are so many users that the difference between $X/N and $2X/N is still ~zero. You can have two providers, or ten, and you're in no danger of them being unable to recover their development costs even at low prices. The cost of paying a number that rounds to zero twice is well worth the benefits of competition. In other words, the barriers to entry are low (absent some artificial constraint). It isn't that the fixed costs are high, they're only "high" relative to the essentially non-existent unit cost. That's totally different. It means that if you want to enter the market for email clients or messaging apps or phone games, that can be done by an individual or a small business. A small business can't build their own power grid.