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Product differentiation for various markets and price discrimination are both common techniques that even a monopoly can use to extract more profit. They know
by nwah1 4y ago
Product differentiation for various markets and price discrimination are both common techniques that even a monopoly can use to extract more profit.
They know that not everyone would be able to afford the top tier of service. If Toyota were the only car company, they wouldn't only offer top end Lexus models. They would probably retain the various tiers, and simply try to capture the maximum consumer surplus at each tier.
There's no particular reason why a monopolist would want to remove a cheaper priced but lower functionality service, so long as it is profitable.
By integrating the businesses they might actually be able to find efficiencies and cost savings that make it even more profitable via economies of scale.
Whether those efficiencies end up as consumer savings is a question of how competitive the market is, but I don't see how this would necessarily harm the customer experience.
Might be able to reduce redundant storefronts, headcount, software as a service platforms, etc. Might be able to save money on employee benefits by leveraging larger group policies. They could do all of this while keeping things about the same or better for customers.
The only reason to actually eliminate the lower end of the pricing model is if it is unprofitable. Others would fill the space if they just killed it.
- dumpsterlid 4y agoHave you ever dealt with companies with near monopolies? Are you seriously with a straight face suggesting they tend to act this way? They never do because the WHOLE point of becoming a monopoly or near monopoly is so that the customer no longer dictates the terms of their relationship with the company. The company does. It is about a power shift and simply put power being taken from the customer is never good for the customer.
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- sanp 4y agoWhy would a monopolist keep things the same or better? As you said, consumer surplus is the key here. The monopolist will capture almost all of the consumer surplus. This is a worse situation for customers than with competition. With competition this isn’t likely.
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- nwah1 4y agoMint Mobile is a service that offers cheap phone plans but doesn't have their own telecommunications stack. It is just enabling a lower tier of customer to operate on the same stack as everyone else. This is vertical integration, not horizontal integration. The level of monopolization remains the same. And even with a monopoly, some of the benefit of simple convenience could come into play when there is acquisitions. Not having to go to a separate store and maintain separate accounts for different things. Having a cable company that sucks and a phone company that sucks is not good. If they merged and the service remained the same then now you just have two bundled services that both suck. Yet, having a bundled plan would potentially be more convenient. T-Mobile offers streaming services, home internet, and other things that Mint doesn't.
- babypuncher 4y agoYep I remember all the great deals on phones and phone service you could get back when Bell was the only option. Good times. /s
- nwah1 4y agoAnother problem with monopolies is that they atrophy so much that they can fail to even maximize their own profit. And I didn't say you would get a great deal from a rational monopolist. I said that you would get tiered services that keep consumer surplus as low as possible. But T-Mobile is not a monopoly.