[DerpDerpDerp]

There are markets with no real viable alternative to Walmart, because Walmart used their scale to crush competition, and no has made it uneconomical to start a rival business, since they'll temporarily lower prices below sustainable (using their scale), then raise them again when the other store dies.

If Walmart has enough local monopolies, this is a self-reinforcing strategy, since it's unlikely all of the monopolies will be challenged at once, and Walmart can thus have a few of them with unusually low prices while the rest sustain that one during the conflict (since they're guaranteed to have business, being the only store in town).

[AnthonyMouse]

So the thing about a monopoly is it's totally squishy. There isn't a clear line you cross to become one because there is no clean way to define a market. Every customer places a different value on the product itself, the search and transportation cost of buying from alternative retailers, etc.

So take Walmart. Do they have a local monopoly? First, question, on what? If you want to buy a television then they almost certainly don't, because they have strong competition from Amazon and six dozen other Internet retailers, and on top of that customers tend to be willing to drive out of town to save real money on a big ticket item.

But what about, say, groceries? That pretty much puts the Internet out of the running, because you can't ship a single gallon of milk in a refrigerated truck for anything resembling a competitive price. So then the question is, how far away is the nearest local competitor? If it's only a five minute drive, maybe that's enough competition. If Walmart's prices get out of hand people will start to make the drive. But what if it's 15 minutes? 30 minutes? 45 minutes? What if a substantial portion of the local population doesn't own a vehicle and that "15 minute" drive is a two hour walk? So maybe some Walmart stores have a local monopoly on groceries.

But wait, there's more. If Walmart's local prices start to get out of hand, how hard is it for a competitor to open up? It turns out the answer is, not very hard. A small grocery store is a one person operation. Low barrier to entry. If new competitors spring up six hours after Walmart raises their prices, they can't actually raise their prices very much no matter how far away the nearest existing competitor is. Which is why, even in towns with only that one Walmart, it still doesn't cost $20 for a gallon of milk.

[DerpDerpDerp]

I think there's a second element to why a gallon of milk isn't $20: Walmart relies on not upsetting too many people, who collectively wield enough local political power to harm Walmart locally.

It would only take a local wage initiative, for instance, to likely bother the closest Walmart. So there's an inherent incentive not to let prices rise so much that people are angry enough to get the government involved because they can no longer buy milk (or food).