Monopolies are anti-competitive. Without competition there is no incentive for innovation, lowering prices, not price-gouging etc. Is a 10x better product really 10x better if it is also 10x more expensive and there is no alternative?
Depends a lot on what the monopoly in question is.
1. How much room for innovation is there?
2. How hard is it to substitute the good / service provided by the monopoly?
In the case of food delivery apps there isn't much room for service improvement. A monopoly here probably isn't preventing much innovation. How much better can you get at delivering food from a restaurant?
And there is an easy substitute in terms of driving to the restaurant yourself, so if the monopoly tries to jack up prices too much they will steadily lose customers. The prices now are so high that they have already lost me. I use those apps < 5 times a year.
Not innovating, maintaining high prices, and price-gouging are unstable activities for a monopoly, as in it would open up a void for effective competition. The real anti-competitive actions is that it becomes cost effective to do regulatory capture / pay bribes to politicians. A monopoly can pay to play in a way that fledging competitors cannot. Once the industry has been captured then they can do rent seeking behaviors without worrying about competition.
If allowed, an incumbent monopoly will do the minimum innovation or tactical pricing necessary to keep out competitors - even if it means they suffer a temporary loss.
This can effectively create a barrier to entry high enough that no small company has a chance to beat them. Since insolvency before overcoming the barrier is foreseeable, no one even tries, and the monopoly gets to keep high prices (compared to a competitive market if they weren't there).
How many desktop OSes can you choose from walking into BestBuy? And this is decades after MS was convicted of being a monopoly and illegally paying computer manufacturers money to keep competitors off.
> Not innovating, maintaining high prices, and price-gouging are unstable activities for a monopoly
Depends how good their moat is. Or how deep their pockets are, because they can often bribe to keep their competitors out (Intel vs AMD). Or just buy their competitor outright.
terminalshort|7 months ago
1. How much room for innovation is there?
2. How hard is it to substitute the good / service provided by the monopoly?
In the case of food delivery apps there isn't much room for service improvement. A monopoly here probably isn't preventing much innovation. How much better can you get at delivering food from a restaurant?
And there is an easy substitute in terms of driving to the restaurant yourself, so if the monopoly tries to jack up prices too much they will steadily lose customers. The prices now are so high that they have already lost me. I use those apps < 5 times a year.
cjbgkagh|7 months ago
A1kmm|7 months ago
This can effectively create a barrier to entry high enough that no small company has a chance to beat them. Since insolvency before overcoming the barrier is foreseeable, no one even tries, and the monopoly gets to keep high prices (compared to a competitive market if they weren't there).
vlovich123|7 months ago
Herring|7 months ago
Depends how good their moat is. Or how deep their pockets are, because they can often bribe to keep their competitors out (Intel vs AMD). Or just buy their competitor outright.
lozenge|7 months ago