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Ironically, during the anti-trust trial of Standard Oil, Rockefeller's market share kept slipping. His competitors figured out how to compete with him. As for

Ironically, during the anti-trust trial of Standard Oil, Rockefeller's market share kept slipping. His competitors figured out how to compete with him. As for Rockefeller being a "robber", the rise of Standard Oil resulted in the price of kerosene dropping 70%.

littlestymaar 7mo ago
If technical advances make cost go down 90% but prices only goes down by 70%, someone is making tons of money at the expense of consumers. That's what happened with the telco by the way, the price is is still significantly lower than 40 years ago, but in the US it's still more expensive than it should.
- WalterBright 7mo ago
  Margins are not owed to customers, whether they are large or small. Supply & Demand sets the price. For example, if you buy a car for $5000 and flip it for $10,000, you don't owe your customer a discount.
  - littlestymaar 7mo ago
    “Supply and demand” refers to the idea that under competition, prices will go down to the marginal cost of production. When a cartel sets a price it's very much not “supply and demand” who sets the price, it's the cartel…
    - WalterBright 7mo ago
      The cartel setting a price is still subject to the Law of Supply and Demand. The Law is not about setting a price, it is about how much sales you're going to get at a particular price point. Maximizing the price is not the same thing at all as maximizing profit. Standard Oil made more money by reducing prices, not maximizing them.
      - littlestymaar 7mo ago
        There are many instances of “the” law, but your argument basically boils down to “who cares about markets, monopolies are good” which is a strange take.
        WalterBright 7mo ago
        > a strange take and a strawman. Monopolies are still subject to the Law of Supply and Demand, whether they are good or bad.
        littlestymaar 7mo ago
        It's not a strawman, right above you said Standard Oil didn't steal anything because monopolies “don't owe [their] customer a discount.”
        WalterBright 7mo ago
        > “who cares about markets, monopolies are good” I never wrote anything resembling that fabrication, and it doesn't follow from your reply, either.
        littlestymaar 7mo ago
        > As for Rockefeller being a "robber", the rise of Standard Oil resulted in the price of kerosene dropping 70%. This is your quote right? Now tell me how this doesn't resemble the “fabrication” above? And indeed it follows from my reply as well: if setting prices independently from costs is OK, then monopolies are good. Because market competition is lauded for preventing exactly that.
        WalterBright 7mo ago
        I quoted "robber" in https://news.ycombinator.com/item?id=47654948 https://news.ycombinator.com/item?id=47654948 when I replied to it. I did not "fabricate" it. > if setting prices independently from costs is OK, then monopolies are good. Because market competition is lauded for preventing exactly that. Your premise does not lead to your conclusion. It doesn't make any sense.
bumby 7mo ago
Falling prices is not always indicative of a well-functioning competitive market. Rockefeller was known to deliberately lose money to undercut his competitors and put them out of business. With enough scale, a near-monopoly can provide irrational predatory pricing long enough make competitors insolvent. In between, it looks like the near monopoly is losing market share while prices drop. Without taking the larger context, it's easy to misconstrue the long-term anti-competitive systemic effects.
- WalterBright 7mo ago
  Rockefeller did not get rich by losing money. Nor did Rockefeller eliminate his competitors. He never got more than a 90% market share. SO was not tried for being a monopoly, it was tried for trying to create one. SO's market share sank during the trial, as Rockefeller's competitors learned how to compete with him. See "Titan" by Chernow. > With enough scale, a near-monopoly can provide irrational predatory pricing long enough make competitors insolvent. The reason this doesn't work is if X has 10 times the market share of Y, if X wants to lose money to hurt Y, X loses 10 times the money that Y loses. I.e. the larger the market share of X is, the proportionately more money is lost trying to undercut Y.
  - bumby 7mo ago
    Chernow is more of a laity source than an academic one. Fun to read, but it’s not a strong source. He tends to over emphasize the efficiency side and neglect the logistical barriers to entry and many would consider Chernows thesis incomplete. If your claim is that someone needs to have 100% market to be anti-competitive, we’re talking past each other. I know HN can have relatively high levels of binary thinking, but the real world is more complicated and nuanced. X doesn’t have to perpetually lose money, just long enough to put Y out of business. Modern definitions of predatory pricing did not exist at the time, but that is essentially what Standard Oil was found guilty of in their day. They can also lose market share as new markets emerge but that doesn’t undermine the monopoly argument. If I have a utility in TX and another utility opens in CA, my regulated monopoly is still intact.
    - 7mo ago

littlestymaar 7mo ago

If technical advances make cost go down 90% but prices only goes down by 70%, someone is making tons of money at the expense of consumers. That's what happened with the telco by the way, the price is is still significantly lower than 40 years ago, but in the US it's still more expensive than it should.

WalterBright 7mo ago
Margins are not owed to customers, whether they are large or small. Supply & Demand sets the price. For example, if you buy a car for $5000 and flip it for $10,000, you don't owe your customer a discount.
- littlestymaar 7mo ago
  “Supply and demand” refers to the idea that under competition, prices will go down to the marginal cost of production. When a cartel sets a price it's very much not “supply and demand” who sets the price, it's the cartel…
  - WalterBright 7mo ago
    The cartel setting a price is still subject to the Law of Supply and Demand. The Law is not about setting a price, it is about how much sales you're going to get at a particular price point. Maximizing the price is not the same thing at all as maximizing profit. Standard Oil made more money by reducing prices, not maximizing them.
    - littlestymaar 7mo ago
      There are many instances of “the” law, but your argument basically boils down to “who cares about markets, monopolies are good” which is a strange take.
      - WalterBright 7mo ago
        > a strange take and a strawman. Monopolies are still subject to the Law of Supply and Demand, whether they are good or bad.
        littlestymaar 7mo ago
        It's not a strawman, right above you said Standard Oil didn't steal anything because monopolies “don't owe [their] customer a discount.”
        WalterBright 7mo ago
        > “who cares about markets, monopolies are good” I never wrote anything resembling that fabrication, and it doesn't follow from your reply, either.
        littlestymaar 7mo ago
        > As for Rockefeller being a "robber", the rise of Standard Oil resulted in the price of kerosene dropping 70%. This is your quote right? Now tell me how this doesn't resemble the “fabrication” above? And indeed it follows from my reply as well: if setting prices independently from costs is OK, then monopolies are good. Because market competition is lauded for preventing exactly that.
        WalterBright 7mo ago
        I quoted "robber" in https://news.ycombinator.com/item?id=47654948 https://news.ycombinator.com/item?id=47654948 when I replied to it. I did not "fabricate" it. > if setting prices independently from costs is OK, then monopolies are good. Because market competition is lauded for preventing exactly that. Your premise does not lead to your conclusion. It doesn't make any sense.

bumby 7mo ago

Falling prices is not always indicative of a well-functioning competitive market. Rockefeller was known to deliberately lose money to undercut his competitors and put them out of business. With enough scale, a near-monopoly can provide irrational predatory pricing long enough make competitors insolvent. In between, it looks like the near monopoly is losing market share while prices drop. Without taking the larger context, it's easy to misconstrue the long-term anti-competitive systemic effects.

WalterBright 7mo ago
Rockefeller did not get rich by losing money. Nor did Rockefeller eliminate his competitors. He never got more than a 90% market share. SO was not tried for being a monopoly, it was tried for trying to create one. SO's market share sank during the trial, as Rockefeller's competitors learned how to compete with him. See "Titan" by Chernow. > With enough scale, a near-monopoly can provide irrational predatory pricing long enough make competitors insolvent. The reason this doesn't work is if X has 10 times the market share of Y, if X wants to lose money to hurt Y, X loses 10 times the money that Y loses. I.e. the larger the market share of X is, the proportionately more money is lost trying to undercut Y.
- bumby 7mo ago
  Chernow is more of a laity source than an academic one. Fun to read, but it’s not a strong source. He tends to over emphasize the efficiency side and neglect the logistical barriers to entry and many would consider Chernows thesis incomplete. If your claim is that someone needs to have 100% market to be anti-competitive, we’re talking past each other. I know HN can have relatively high levels of binary thinking, but the real world is more complicated and nuanced. X doesn’t have to perpetually lose money, just long enough to put Y out of business. Modern definitions of predatory pricing did not exist at the time, but that is essentially what Standard Oil was found guilty of in their day. They can also lose market share as new markets emerge but that doesn’t undermine the monopoly argument. If I have a utility in TX and another utility opens in CA, my regulated monopoly is still intact.
  - 7mo ago