Comment by nanis
4 years ago
Except that the definition of monopoly power is that the company is facing a downward sloping demand curve and that it is operating on the elastic portion of it.
In general, that provides an incentive for other firms to produce a close substitute at a slightly lower price and eat away at your profits unless the government is there to stop them. Monopoly power cannot be sustained without government intervention. In addition, monopoly pricing incentivizes consumers to look for substitutes.
If you look in real life, you will see that monopoly power is sustained through restrictions on who can sell stuff and from whom you are allowed to buy.
> Monopoly power cannot be sustained without government intervention.
Hum... Monopoly power cannot be sustained without barriers to enter. There's nothing saying that those barriers must come from a government. There are plenty of examples where they do, and also plenty where they don't.
Anyway, I don't see how any of that is an except to my earlier point.
> a monopoly will have a much easier time extracting value
That's my point. In the static picture it might seem so, but in the dynamic picture the extracting of the value incentivizes competitors to enter and consumers to seek substitutes.
Would you mind mentioning an example of long lasting monopoly power (which is different than just being the sole seller of something -- after all, everyone is the sole seller of something)?