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: Are monopolies evil? Should the...28 Views
Finance allah shmoop our monopolies Evil Should they be regulated
Should they be illegal Alright well big question Here are
monopolies evil And as bill gates used to say well
not a few own one Well okay bill was just
a little bit evil or maybe a lot depending on
whether or not you came from silicon valley So the
common wisdom among most voting public kind of people is
that monopolies are bad evil and awful Why Because they
can charge anything they want for whatever their product is
They have no competition Keep him honest Well microsoft via
their windows operating system was the greatest monopoly in history
Sorry they're rockefeller And for a long time that company
had massive profit margins until the internet more or less
became the operating system along with all the tools needed
for it And it was all more or less free
ish Wealthy interviewee it took to maintain the windows monopoly
along with regulatory friction eventually killed microsoft's monopoly and well
that was that But for a while microsoft had someth
fifty percent net profit margins about five times the margins
of even the best s and p five hundred companies
Worth noting coca cola and pepsi have what is called
a duopoly The two of them together would be essentially
a monopoly of soda but well they more or less
collude on pricing and terms and elbow out any would
be third editor so their margins are high about twenty
five percent or about half of what monopoly profit margins
give so that's the quote bad stuff unquote a monopoly
brands unfair advantage But if you were a shareholder of
microsoft in the eighties and the first half of the
nineties well you'd be just tickled Have you owned one
hundred shares of that awesome monopoly in nineteen eighty four
and held them fifteen years Well your original investment of
one hundred dollars would have turned into thousands like six
seven eight thousand dollars So what's so bad about making
hundreds of times your money Oh and here's another thing
to think about it and t the big t on
the big board Well t was the big monopoly before
microsoft and it owned local and long distance carriage of
phone calls for half a century Give or take it
had obscene profits in large part by virtue of the
us government granting them federal licenses to operate in various
areas in whatever form they needed Teo you know wire
our country But a number of good things came from
this monopoly one thing being that a teen t never
cut its dividend like most of the other companies did
during the great depression A lot of families lived on
that and not cutting that dividend literally saved the lives
of those families like hundreds of thousands of americans who
lived on it for luxuries like eat food and rent
so on Additionally is part of the monopoly handshake Att
and t was required to wire rural america These guys
remote farmers like if even one home existed forty miles
from pretty much nowhere a teen t had to spring
wires on poles all the way down to dead ends
ville and get that home wired and that served the
country well when farms became factories and well a whole
country could talk to each other without monopoly level profits
gained from more dense population areas Well att and t
never would've had the money or desire to spend a
few hundred thousand dollars it cost to connect that loan
Farmhouse in the boonies to the grid Why was that
so important Well eventually that loan farmhouse made it with
another farmhouse and there were two of them and then
five and then twenty and then three hundred and yes
having ubiquitous connectivity of every living human being in the
country said something about the u s of a that
we took care of all of our people whether city
slicker a redneck and allowed everyone to share in the
opportunities provided by a fancy new technological marvel called the
telephone So our monopolies good bad lukewarm Well hard to
say so Uh maybe monopolies are like pineapples sometimes good
like in a fruity tropical drink and sometimes terrible like
on a pizza Yeah we're just saying you have to
peel off the skin maybe it's better if you do
that and don't bother sending in an angry pineapple pizza
related letter we've got a special place for those in 00:04:21.049 --> [endTime] a shmoop h q huh
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