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Imagine you own a small cigar shop on a street. Then a large supermarket chain moves in beside you. However, everyone still buys their cigars from you because y
by markessien 17y ago
Imagine you own a small cigar shop on a street. Then a large supermarket chain moves in beside you. However, everyone still buys their cigars from you because you are selling good quality cigars. So the big shop decides to declare cigars a loss leader, and sells them at a loss. You lose all your customers, and go out of business. The big store then sells cigars at standard price, and people now buy because there is no competition.
Big companies have the resources to compete unfairly against small companies. Oversight is needed in case they are actually abusing their monopoly power.
- randallsquared 17y agoSmall firms, however, can use loans and investment to hang on longer, and the longer they hang on, the more likely that the big company will give up. Even when they do go out of business, if the big company raises prices too much, there will be an obvious market opportunity and someone will start up a cigar shop, and then the big company has to sell at a loss for another 6 months, 2 years, or whatever, and then the cycle can repeat. There's almost always going to be someone willing to bet that the big company will give up this time, and that very fact makes them more likely to actually give up, once they understand it. Of course, in the real world, what they'll do is quietly fund an anti-tobacco zoning ordinance (which they're grandfathered in for, of course), or use some other trick that amounts to keeping out competitors at government-point, because that's what big companies do, if they can. Actual competition isn't nearly as harmful as lobbying.