Monopolies have the power. All of it.
Since monopolies don’t face any market competition by definition, they are price setters instead of price takers. For instance, if there was only one company making smartphones and nobody else could, they could make the price of smartphones anything they wanted. Scary.
A discriminating monopoly is a monopoly that tries to squeeze the maximum price people are willing to pay, charging different prices for different groups. The classic example of a discriminating monopoly IRL is airlines. You know how tickets are initially priced low, and then if you wait too long, they’re super-expensive? Yep, that’s discriminating right there, on that specific good.
The price is low in the beginning to get buyers to swoop in. Once enough bargain hunters have gotten their seats, the airline will raise the price for those last-minute people. If there are still some empty seats, they’ll lower the price again to get bargain hunters who are willing to hop on a flight that they maybe weren’t expecting to.
That’s a time-example of price discrimination, but there are also geographic examples, like stores in wealthy neighborhoods that charge more for the same stuff sold in the poorer neighborhoods. In order for monopolies to discriminate on price, they have to find some way to cater to the different groups, whether using time, geography, or...something from the Twilight Zone…
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Finance: What are monopolies and monopso...5 Views
Finance Allah Shmoop What are Monopolies vs Monopoly Sinese Ah
monopoly that great nineteen Our game control a whole side
of the board build houses then hotels on it and
odds of a competitor landing there to suffer huge fees
are wickedly Hi You take that cash buy more properties
build more houses and hotels and eventually rule the world
or at least the board That's a monopoly When you
own everything and can raise rates it's pretty much whatever
level the market will pay before just opting Tio do
nothing and stay at home with a key phrase Here
is mono and it's not related to the you know
team kissing disease mano as in one one owner One
center of price is the only game in town will
think Microsoft in the nineteen nineties where its operating system
was pretty much the only way in which computers around
the globe could work pork Today a Google search which
is almost a monopoly with some ninety eight percent of
searches on its servers Is it bad that these companies
produce such amazingly high desired products that they grew into
monopolies No no not at all However regulators got all
willy on them for using that monopoly leverage to then
restrict business from peripheral competitors And that's a naughty That's
a no no The key issue revolves around what governments
defined as quote fair competition unquote like what is fair
here Well if a gas station uses its leverage as
a place where SUVs go to drink up is it
fair for that station to sell a pack of gum
for five bucks Totally But what if the station forced
you to buy that stick of gum with every gallon
of gas Do you have alternatives What if the owner
of that station owned all of the stations within five
hundred miles and then forced everyone who filled up toe
by that five dollar gun with each fill fair pausing
Yeah probably not Well you could say that they have
a local monopoly and that they are unfairly leveraging that
monopoly to there Gummi advantage But okay so that's Monopoly
What about Manafort's une Well a monopoly Billy was one
seller Ammen Ops Unni is one buyer Think a coal
mine in a small town in West Virginia As a
buyer of labour there simply isn't another employer anywhere remotely
close I'm an optioning Well certainly a local one What
about a public school district buying textbooks for its students
Yeah pretty much of an option E Yes private schools
by textbooks but they usually represent a small percentage of
the public school volumes at least in most areas of
the country And there's not a whole lot of demand
for American textbooks in Russia right Amazon Well as faras
books go Amazon probably is well they're responsible for some
seventy percent of all books sold in the country and
well over half around the world And that number's going
up not down So that vaunted man ops any status
is probably coming The result While Amazon can buy it
pretty much any price they want to buy at just
up until the cellar of that book decides it's not
even worth the effort to go pack up the book
in a box and ship it to him or Teo
Get them the log in codes you know to download
it from their servers That isthe Sellers will sell to
a monopoly money until the marginal value at our contribution
of that last book is zero Then they'll stop and
sit there on a whole pile of books or data
that they have to store and we'll do a whole
lot of nothing Well all of this may sound like
it brings the wheels of the world to a halt
It doesn't necessarily mean that right if monopolies price their
products so high that nobody buys well their monopolies worthless
And if men ops inis pay so little for the
product they consume That producer stopped producing it Well then
the need they lived to serve isn't filled and they
more or less die So there is eventually kind of
economic detente in this war of power and leverage It
just you know sheds a lot of blood getting there
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