Board games and Billionaires

As a kid, my favorite board game was always monopoly. I used to beg my siblings to play with me so I could drive them to bankruptcy as fast as possible! Although I haven't played the game in years, I think it is humorous that if the word “Monopoly” is mentioned, people first think of a board game, and then of a billionaire running an evil corporation. I liked how in this presentation, the speaker spent a lot of time showing ways that monopolies exist that are outside of these two contexts. The two main thoughts I had from reflecting on this presentation were: first movers are monopolists, and is there any place for government intervention in pricing contracts.

First movers are monopolists

If you really think about it, all entrepreneurs need mustaches and top hats if you really want to stick to a strict definition of a monopoly. This concept that you automatically generate a monopolistic selling environment by just being the first makes a ton of sense, but is often over looked. As he explained this concept it made me reflect on what having one seller in the market actually means. Basically, if you are the only seller in the market for a prolonged period of time inside a free market, it just means that you perform so well, and provide so much value, that no-one can undercut you. If you aren’t getting any help from the government, or other means, then people must be buying your product the most. Although there are modern day examples such as utility companies, even they have to abide by the laws of the free market. Although they could certainly raise prices a bit and retain market share, if their quality or price becomes unaligned with market incentives, there will always be replacements. This brings up the interesting concept of what it truly means to have no other alternatives. When it comes to real life, I think you would be hard pressed to find a situation in which there are no alternatives to any product. In the speakers example, although Apple had a monopoly on iPhones, they certainly didn't have a monopoly on phones in general. By realizing that there may be extremely niche sectors that are controlled by one company, when you look at the bigger picture, there is always an alternative that keeps the main player in check through the free market. Overall I liked the way this speaker talked through the concept of a monopoly in order to show that if you really want to stick to the strict definition, then all entrepreneurs are monopolists, but in reality, there are always alternatives. 

Government is always the problem?

I felt like one of the main themes of this presentation was how the government screwed things up. In every case, a student would ask a question to propose a situation in which monopolies are taking advantage of the market, and every time he would show how this situation came about because of government intervention. I thought the examples of government subsidy and influence were particularly pertinent to the topic. It is often frustrating to see companies buy off politicians though lobbying, or do their best to change laws in their favor. However, when you let a true free market play out, there is no incentive, or even opportunity for these actions. If the government didn’t play a role at all in the markets, then nothing would be gained by having an influence in the government. I thought this was a smart way of reframing the problem to emphasize that the government isn’t the solution in these situations, but rather the source of the problem. *The only issue which I would be curious to see if there could be some benefit from government intervention or regulation would be in the form of pricing contracts. I believe that it is possible for some form of monopoly to exist and shield itself from most if not all competition. If there is a massive company, they can pressure their suppliers and other companies they work with to not engage with any potential rivals. This means that since the suppliers wouldn’t want to risk a far higher portion of their revenue serving the monopoly in the market they may never engage with startups. This could lead to a situation where hypothetically there are alternative suppliers, or an amount of capital that could start a vertically integrated end to end company. However, this barrier to entry could be so massive that there is a lot of freedom in how far a monopoly could break the rules and abuse consumers before it is reasonable for competitors to come in. I think these situations may be rare, but would be curious to discuss the topic of how this could be disincentivized either through regulation, or market forces.* Overall this was an intriguing presentiment that has made me realize that there is alot more to the conversation of monopoly than board games and billionaires.