Couldn’t a monopolist cut prices to discourage rival entrants into his industry?
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Couldn’t a monopolist cut prices to discourage rival entrants into his industry?
Started by Murphy, Sep 07 2005 08:17 PM
2 replies to this topic
#2
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Posted 29 July 2008 - 11:20 AM
Yes, for a very short time; however, losses mean bankruptcy. This has always been the "wal-mart complaint." Wallie World comes in with low prices to run all the Mom and Pops out of business and then with the geographic monopoly raises prices. This would nonetheless produce the traditional competitive price in the longrun. Or if prices became monopolistic, someone would reenter the market.
#3
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Posted 20 September 2008 - 10:57 PM
Mart Grams, on Jul 29 2008, 11:20 AM, said:
Yes, for a very short time; however, losses mean bankruptcy. This has always been the "wal-mart complaint." Wallie World comes in with low prices to run all the Mom and Pops out of business and then with the geographic monopoly raises prices. This would nonetheless produce the traditional competitive price in the longrun. Or if prices became monopolistic, someone would reenter the market.
Right. And with durable goods, the new entrant could even stockpile when the monopolist cuts rates initially, to put an artificial drain on the monopolist who is selling below cost.
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