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Technology Stocks : Advanced Micro Devices - Moderated (AMD) -- Ignore unavailable to you. Want to Upgrade?

To: Tenchusatsu who wrote (219930)	12/10/2006 4:49:02 PM
From: economaniack	Respond to of 275872

Tench, I appreciate your concern but assure you I spent years mastering the basics of industrial organization and it is you that are misunderstanding the terms as generally used in economics. Social cost in the definition of natural monopoly refers to the cost of production. At this level the analysis does not consider the social "cost" related to pricing and product decisions of an actual monopolist who is exploiting such a monopoly position. The costs you are talking about wrt MSFT are generally referred to as "dead weight" costs of misallocation of resources due to rent seeking behavior by the monopolist. It is generally understood that a firm with a monopoly will act to maximize its own profits in a variety of ways that are detrimental to public welfare. To a certain extent, some of these transfer wealth from the public to the monopolist and are not therefore counted as "social costs" (MSFT and its shareholders are considered part of society)- I apologize if this seems ..err .. counterintuitive, it is the usage. Other choices may enrich the monopolist in ways that decrease the sum of welfare even including the monopolist, the "deadweight" cost. I posted a bit about antitrust in the context of AMD and Intel here : Message 22898641 Generally regulators seek to balance the social savings from avoiding duplication of fixed costs with the social "costs" (now I am doing it) associated with the monopolist's abuse of power. There are a variety of remedies available ranging from demanding that competitive alternatives exist to direct regulation of the monopoly to force more socially desirable behavior. A more thorough discussion would be well beyond the scope of this board. Any decent micro textbook should cover the basics. If anyone wants a basic understanding of the modern theory of Industrial Organization, Baumol Panzar and Willig's Contestable Markets and the Theory of Industry Structure remains the classic reference and is reasonably approachable (also out of print but should be available in libraries). e