Professional Documents
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Pre-Industrial Philosophy of Monopoly
Pre-Industrial Philosophy of Monopoly
Pre-Industrial Philosophy of Monopoly
Philosophy of
Monopoly
Tough Stuff
Example: Building a
bridge across the
Charles River
Question:
Why would we want to
build a bridge across
the river?
Only if called
upon:
1.
2.
3.
Press 1
(Only if told, press 2)
(Only if told, press 3)
0
0
0
Benefits:
Problem:
Engineering problems
Economies of Scale
1
1
Only if called
upon:
1.
2.
3.
Press 1
(Only if told, press 2)
(Only if told, press 3)
0
0
0
Summary
Robber-Barron
Philosophy of
Monopoly
Late 1800s
hypothetical:
Company
1
Company
2
customers
Company
3
hypothetical:
Company
1
Company
2
Company
3
customers
hypothetical:
Company
1
Company
2
Company
3
customers
hypothetical:
Comcast
It can now charge, say, $49.99 for the service
Company profits more than it would have if it
had to compete
You pay more for the price
customers
hypothetical:
Comcast
Itits
can
say, $45.00
fordont
the service
Note:
notnow
thatcharge,
they gouge
you. They
win unless they
make a sale. So they dont price the product out of the range of
Company profits more than it would have if it
dire affordability.
had to compete
Rather, they simply price it so that they can get more than what
You
pay
for the price
they
would
getmore
if competition
existed. They give you a monopoly
(inefficient) price.
In essence, you are subsidizing them. They are not getting the
price that merely allows the business to be profitable, they are
getting the price that alsocustomers
allows for a windfall.
Another
example:
Company
1
Car
Insurance
My
Story
Company
2
Company
3
Geico bill for six months was $412, after being there for several
years. [Kept going up explain variables]
Research shows that lazy (loyal?) consumers pay more because
they dont comparison shop.
Progressive offered me a rate of $274 if I changed companies
Each bill, I expect, it will rise. $300. $320.
If there was no competition, the same insurance would cost above
$400. With competition, it is more efficiently priced at $300
Company
1
Company
2
Company
3
Question:
Is there another way for the companies to get the
monopoly price without merging or being taken over?
customers
Only if called
upon:
1.
2.
3.
Press 1
(Only if told, press 2)
(Only if told, press 3)
0
0
0
Company
1
Company
2
Company
3
Answer: Collusion
Question:
there
another way
for the1 sells to Ohio
1. An agreementIsnot
to compete.
Company
to get#3$45
without
only. #2 sells companies
to Indiana only.
to Michigan.
merging or being taken over?
2. This is what JP Morgan used to do with companies in the
late 1800s (explain). Hed buy large interests in all 3 and get
customers
them to collude. He was
their banker, so he could control
them.
William McKinley
-- Elected President in 1896.
-- Handmaiden of the robber barons
3/16/15
29
3/16/15
31
3/16/15
32
Interest on mortgaged
farm
3/16/15
33
Captain of a trust
wielding legislation as
a sword
3/16/15
34
Comparison to
feudal times
3/16/15
35
Robber Barons
On the backs of
the muggles
Inequality
-- There is great inequality between rich and poor
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37