Free Market vs Socialism

[quasi-modo]

And it won't if there are no laws governing it?

Nope. Can't happen naturally. Game theory tells us that horizontal integration is imporbable.

[Forged]

Hows so? If the best possible move is to sell why pass it up?

[quasi-modo]

Hows so? If the best possible move is to sell why pass it up?

If the best possible move is to sell then you are operating in the shutdown zone because of inefficient production or something and likely you are not in an oligopoly or monopolisitic competition where only few ferms exist, but rather a very competative industry, either that or there is just not much demand for the product you make. Game theory basically states that companies are not going to act together/collude or even merge (would not be the most profitiable solution) because it they have a chance at getting more money by keeping their price low. I can show you a diagram of this. We had this really great cube example in our econ class, it made great sence. This is not to say that firms are not going to buy eachother out in a very competative industry with lots of firms, but monopoly is not going to occur.\

[Adron]

I think you're wrong. Well, depends on how much regulation you'd like to remove, but in what I think you mean, I think monopolies are highly likely to spontaneously happen. This is due to the size of investments required to start up - if the cost to start up a company isn't small enough, that becomes a strong slowing force for competition. As the big big company, you can either buy out your competition while they are still burdened under their loans, or just dump prices selectively until they go bankrupt.

[Forged]

Hows so? If the best possible move is to sell why pass it up?

If the best possible move is to sell then you are operating in the shutdown zone because of inefficient production or something and likely you are not in an oligopoly or monopolisitic competition where only few ferms exist, but rather a very competative industry, either that or there is just not much demand for the product you make. Game theory basically states that companies are not going to act together/collude or even merge (would not be the most profitiable solution) because it they have a chance at getting more money by keeping their price low. I can show you a diagram of this. We had this really great cube example in our econ class, it made great sence. This is not to say that firms are not going to buy eachother out in a very competative industry with lots of firms, but monopoly is not going to occur.\

In a competitive industry anyone that trys to start up is automatically going to lose.  The main groups are going to drop prices or buy out the company before it can get its' ass off the ground.  This leaves you with a couple of corps that control the prices, and as long as they agree with one another can do pretty much what ever it is they want.  Granted that is pretty much what we have now,  I think it would be more rampid and monopolistic if we where to have no laws governing how corperations handle things.

[quasi-modo]

I think you're wrong. Well, depends on how much regulation you'd like to remove, but in what I think you mean, I think monopolies are highly likely to spontaneously happen. This is due to the size of investments required to start up - if the cost to start up a company isn't small enough, that becomes a strong slowing force for competition. As the big big company, you can either buy out your competition while they are still burdened under their loans, or just dump prices selectively until they go bankrupt.

Adron, no. Monopoleis can't happen in pure competition. It is simply not possible, competition it's self will not allow it. I guess I will have to whip up the diagrams in paint to show you.

[quasi-modo]

Hows so? If the best possible move is to sell why pass it up?

If the best possible move is to sell then you are operating in the shutdown zone because of inefficient production or something and likely you are not in an oligopoly or monopolisitic competition where only few ferms exist, but rather a very competative industry, either that or there is just not much demand for the product you make. Game theory basically states that companies are not going to act together/collude or even merge (would not be the most profitiable solution) because it they have a chance at getting more money by keeping their price low. I can show you a diagram of this. We had this really great cube example in our econ class, it made great sence. This is not to say that firms are not going to buy eachother out in a very competative industry with lots of firms, but monopoly is not going to occur.\

In a competitive industry anyone that trys to start up is automatically going to lose.

Not so, in perfect competition you do not even loose, you will just cover your costs. You will not be a big winner in a competitive industry, but you will not loose. You only really loose if you are trying to sell past the shutdown point.

The main groups are going to drop prices or buy out the company before it can get its' ass off the ground.  This leaves you with a couple of corps that control the prices, and as long as they agree with one another can do pretty much what ever it is they want.  Granted that is pretty much what we have now,  I think it would be more rampid and monopolistic if we where to have no laws governing how corperations handle things.

No, they do not agree. That is what game theory is about. Say group a and group b get together, they say we can make money if we raise our prices. Group b thinks let me keep my prices low then I take all the profit and then make more money, group a might be thinking the same thing, but if it isnt it will quickly drop its prices anyway, and bingo both groups sell low... always. In competition collusion cannot occur. Looks like I really do need to make those diagrams.

[quasi-modo]

If both companies get together and there are 2 customers they would each make 10 selling at the high price. But if company b cuts lower then company a then they make 10 and a makes nothing. So both are going to naturally cut low not trusting the other. The way our econ prof explained it (he used different numbers of customers, like it was 6 and different numbers) but b would make more money by screwing a (maybe because it was like $6 and $8) but basically, if this is pure competition the companies are going to backstab eachother when collusion occurs. They do not have a military/govt to hide behind (coff opec) to keep the thing in order.

[Arta]

I think the demonstrable existence of monopolies, or near-monopolies, weakens your agument somewhat.

[Adron]

No, they do not agree. That is what game theory is about. Say group a and group b get together, they say we can make money if we raise our prices. Group b thinks let me keep my prices low then I take all the profit and then make more money, group a might be thinking the same thing, but if it isnt it will quickly drop its prices anyway, and bingo both groups sell low... always. In competition collusion cannot occur. Looks like I really do need to make those diagrams.

If you can produce more items at a fixed cost without any investments, yes, it might work that way. Anyone noticing that prices are kept high will start up their own company and compete with them.

When you add the fact that there's a startup cost, you can suddenly keep prices a bit higher. This helps reduce the number of players in the market. As the startup cost increases, and as production cost decreases with volume, the largest player will increase his profits. Over time, his economical advantage will keep increasing as he grows, and eventually he'll outbuy all the competition, unless there is a stalemate where everyone is equally big. This is unlikely to happen with many competitors, so there'll at least be an oligopoly.

You may want to make those diagrams so we know what you're talking about, but I think you shall find when you think about it that those diagrams aren't proving your point when there is a startup cost.

[quasi-modo]

I think the demonstrable existence of monopolies, or near-monopolies, weakens your agument somewhat.

No. We are talking about in an ideal completely free market... that is what this whole thread has been about.

[quasi-modo]

No, they do not agree. That is what game theory is about. Say group a and group b get together, they say we can make money if we raise our prices. Group b thinks let me keep my prices low then I take all the profit and then make more money, group a might be thinking the same thing, but if it isnt it will quickly drop its prices anyway, and bingo both groups sell low... always. In competition collusion cannot occur. Looks like I really do need to make those diagrams.

If you can produce more items at a fixed cost without any investments, yes, it might work that way. Anyone noticing that prices are kept high will start up their own company and compete with them.

When you add the fact that there's a startup cost, you can suddenly keep prices a bit higher. This helps reduce the number of players in the market. As the startup cost increases, and as production cost decreases with volume, the largest player will increase his profits. Over time, his economical advantage will keep increasing as he grows, and eventually he'll outbuy all the competition, unless there is a stalemate where everyone is equally big. This is unlikely to happen with many competitors, so there'll at least be an oligopoly.

You may want to make those diagrams so we know what you're talking about, but I think you shall find when you think about it that those diagrams aren't proving your point when there is a startup cost.

Startup cost does not really change the fact that there cannot be monoply. I never said there cannot be monopolisitic competition, or oligopoly. The only things that are really not going to exist are pure competition and a pure monopoly. If there is only one company making a good and it is expencive and no one else can get in, chances are the consumer will not have any consumer surplus and will just not buy it so even the 'monopoly' will not have price setting control, which is one of the characteristics of a monopoly. I think this will be an elastic good, otherwise there would probably be other companies going after it. So therefore the consumer is not going to pay for it when he has no surplus.

[WoOdTroll]

Hitler was a moron in killing the jews. Guess how many they could've used in the army?

[Forged]

What?

[quasi-modo]

Hitler was a moron in killing the jews. Guess how many they could've used in the army?

That has absolutly nothing to do with our topic....