[nero]

In another thread jaws and I were discussing monopolies. I felt that while the current laws do a poor job of it there is a good justification to limit monopolies from forming. Jaws took the position that there is no evidence that monopolies ever harm the public interest and therefore shouldn't be banned.link

Chew on this for a simple method to improve competition. Set an age limit on companies of 75 years. Ie. If any part of a company is older than 75 years then the company dies of old age and the assets are sold off in an open auction.

Advantages:
1. It would limit companies buying their competitors since the merged company would have the life expectancy of the older of the two companies

2. It would encourage companies to be not overly reliant on one company for a particular product since they know at some point that company will not be there anymore

3. It would ensure a turnover of capital and ensure that there was always a place for new entrants into a market.

4. If a corporation is viewed as a person under the law why not subject them to "mandatory retirement". It's only fair.

Disadvantages:
There is no way this kind of radical change to our capitalist system could be implemented in the face of entrenched interests.

[emersonbiggins]

Hey, it might work. After all, our corporations are legally 'persons' protected under the Constitution, except that these 'people' never legally die. I think you're onto something.

*edit* I see you've mentioned this in your post...great minds think alike

[gego]

Monopolies are priveleges granted by those in power (kings, government, etc). Very few monopolies arise out of the free market, and when they do they can only continue if they are more effecient than the various upstarts that come along and challenge them.

So if you want to stop monopolies (government grants of privelege) then you simple need to have governments stop granting these priveleges. Of course this will not happen because government and monopolies support one another.

Check the dictionary definition of monopoly.

[nero]

$this->bbcode_second_pass_quote('', 'M')onopolies are priveleges granted by those in power (kings, government, etc). Very few monopolies arise out of the free market, and when they do they can only continue if they are more effecient than the various upstarts that come along and challenge them.

[smiley]

$this->bbcode_second_pass_quote('', 'V')ery few monopolies arise out of the free market, and when they do they can only continue if they are more effecient than the various upstarts that come along and challenge them.

[jaws]

The law of optimums states that some industries are naturally more efficient with only one supplier. Specialized computer software for health care, for example, will only have a market with a few hospitals worldwide, and it is more efficient to pool all resources with one company. Such a company would exhibit increasing returns to scale.

Some industries will suffer from scale however. A hair salon gains nothing from merging with other hair salons except increased management overhead and reduced profits. This industry remains more efficient with many independent suppliers.

The idea that you can "improve" competition is bogus. In a free market with no coercion, competition is the natural state of any business, no matter how big or how alone it is in its sector.

Here's a short and enlightening essay on the subject, published during the Microsoft trial:
$this->bbcode_second_pass_quote('', 'T')he Microsoft trials remind us that the fear of industrial concentration is the last refuge of socialist theory. The claim is that capitalism ultimately fails because all (or most, or at least some) industries naturally congeal into monopolies in a free market. It follows that government must regulate industries to bring about "competition." It also follows that since some people in these giant private industries become unpalatably wealthy, it is fair to confiscate their personal wealth and give it to people who are less wealthy.

The assertion that free markets lead to monopoly is wildly incorrect. If the market is allowed to work freely over time, an apparent monopolist soon discovers that it indeed has competition. A company operating in a market economy looks like a monopoly only under myopically static analysis. A broader definition of any industry will show that there is plenty of competition, just as a narrow enough definition will show that any brand name product has some monopoly characteristics, such as a popular brand of ice cream.

The airline industry is an example. There are now two manufacturers of large passenger jets: Boeing and Airbus. Punditry has expressed inevitable fears over monopoly profits and passenger safety. However, Boeing's actions in the last three years--most notably, attempts to cut costs by modernizing the entire production process --suggest that Boeing believes it has competition.

Boeing is right, and the competition is not just from Airbus. Suppose Airbus closes its doors, and only Boeing remains. Suppose also that Boeing faces no government regulation. Can Boeing raise prices at will? If it does, in the short term, people who have to travel will find alternatives to air flight in increasing numbers. Airlines would use smaller planes as much as possible. In the long term, companies such as Beechcraft and Cessna, seeing higher than normal profits available to an interloper, might build larger jets.

[...]

"Fear of Monopoly" - http://www.mises.org/story/621

[pogoliamo]

There is no way to improve the market competition without introducing new flaws. The terms "market" and "competition" are just theoretical simplifications. The market theory is based on few idealistic assumptions and it is just one part of the real-life game.

The problem is that there are plenty of reasons for the markets to be imperfect. To name some: social, political, infrastructural, nationalistic pride, psychological, and if you want even the climate can affect the markets. This is imposed by nature, so there are limitations always. These limitations are the reasons why market theory does not work by it self and needs some intervention. Since those "regulation" laws are made by
humans and impemented by humans they may cause more problems then they solve.

So if I borrow the example from jaws post (here I disagree with you jaws)

$this->bbcode_second_pass_quote('', '
')Boeing is right, and the competition is not just from Airbus

[smiley]

$this->bbcode_second_pass_quote('', 'A') hair salon gains nothing from merging with other hair salons except increased management overhead and reduced profits. This industry remains more efficient with many independent suppliers.

[jaws]

$this->bbcode_second_pass_quote('smiley', 'T')hat's why they invented a thing called franchising. It leaves the management locally, but cuts back on several costs such as advertising, interior decoration, supply etc. And most importantly you don't have to compete on price within a franchise. Most hair saloons here are part of a franchise the others will be in a few years time.

It is just a different type of monopolization.

[smiley]

$this->bbcode_second_pass_quote('', 'C')ity restaurants are often independent and heterogenous because that appeals to urbanites, and they're certainly not going to start paying franchise fees in return for a service that earns them nothing back.