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To: ahhaha who wrote (22711)	5/29/2000 2:24:00 PM
From: gpowell	Read Replies (2) \| Respond to of 29970

This is the great mistake of the 20th century. It's built on distrust , yet it is distrust that accelerates the demise of oligopoly and monopoly. When government interferes to protect, they undermine what distrust would do. Government intervention creates laws so that the components cooperate. Did you not say, or B & S say, "the propensity of competitive businesses to cooperate at some level to maximize the profits of the group". The government laws constrain the ability to maximize profit and so the components lean on cooperation until it becomes collusion. It isn't overt. It's like the way airlines raise prices. I agree. The effect of government intervention in the market mechanism of the economy, is to make the system work more, not less, like one made up exclusively of giant corporations. Then few industries in the US are competitive. This definition is a definition predicated exclusively on price. There are other criteria for choosing one product over another and so competition can proceed in different characteristics which may allow a high cost producer to thrive. I think this is exactly what B&S are saying. Once the oligopoly is established, these organizations tend to compete on everything but price. From B&S "Any company or group of companies that believes it can permanently benefit from aggressive price tactics will not hesitate to use them. This is the natural path taken by most industries, during some early phase, where firms are jockeying for position and no reasonably stable pattern of market sharing has yet taken shape. In these circumstances, lower cost producers, may sacrifice immediately attainable profits to the goal of increasing their share of the market. Higher cost producers, unable to stand the pace, may be forced into mergers on unfavorable terms or squeezed out of the market altogether. In this fashion, the industry goes through a shake down process at the end of which a certain number of firms have entrenched themselves and demonstrated their capacity to survive a tough struggle. When this stage is reached, the remaining firms find that aggressive price tactics no longer promise long-run benefits to offset short-term sacrifices. .... The end of the shake down period naturally does not mean the end of the struggle for larger market shares; it simply means the end of price competition as a weapon in that struggle. The struggle itself goes on, but with other weapons. That is why, though the traditional theory of monopoly price applies with only minor qualifications to the economy of giant corporations, that economy nevertheless does not function as though it were composed of pure monopolies." Very 20th century of them. A collection of low cost producers doesn't bring about monopoly or oligopoly unless government intervenes for arbitrary reasons. Both monopoly and oligopoly are transient states since they are inherently inefficient. Government creates laws to restrain these two and the result is they are bailed out, propped up, prevented from meeting their timely Schumpeter disappearance. B&S would argue that 'once the "largest scale unit of control" has taken over, "the new commodity, the new technology, or new source of supply, the new type of organization" all tend to to be monopolized by a handful of giant corporations, which tend to behave towards each other in a manner which Schumpeter himself characterized as "corespective"' . So if we are to believe the thesis of B&S, the government actively intervenes in the free market mechanism such that as a market matures the remaining firms act in a corespective manner. As you say there is no outright collusion. Through trail and error, prices will have a propensity to go higher so that profits are maximized for the group. The implication of B&S model, which I haven't fully illustrated here, is that the firms, in mature markets will continue to have strong competitive incentives to cut costs. Hence, new products are continually brought to the market that enable prospective buyers to reduce their costs. Much of what we think of as competition, i.e. cost reduction, innovation, still apply to the monopoly capitalist economy. However, with declining cost, but a tendency for prices to rise, the system has a propensity for ever increasing profit margins. We can conclude that any firm that survives to the oligopoly stage will show a tendency for increasing profits.

To: ahhaha who wrote (22711)	5/29/2000 2:41:00 PM
From: gpowell	Read Replies (1) \| Respond to of 29970

I guess ATHM will have to split into two companies, one is NDSP and the other is the ISP. Same with AOL and any others. We need a competitive market at every separate and distinct level. By your own assertion we are staying within cable and I think that's right. There is the cable industry separate and distinct from the DSL and wireless industries. So to satisfy the Bork Rule there would be ATHM BB, AOL BB, and say, HSAC BB, within the NDSP level. Upon reflection, I believe you are right. Staying within cable, 3 to 4 firms must establish themselves within the NDSP level. The DOJ decision regarding AT&T's ownership of RR is consistent with this view. Therefore, the DOJ will also ensure that AOL does not dominate this level (which doesn't seem possible, anyway). For consistency then, RR should evolve into a NDSP, with the RR ISP Brand being absorbed by AOL. We can assume emergence of a third or fourth NDSP will be guaranteed by the existence of non-ownership affiliated, with regards to ATHM or RR, MSOs. The MSOs have already guaranteed open access, which will satisfy the Bork rule at the "ISP" level.