Mergers are not Monopolies

Steven Horwitz

That is the title of my latest blog post at PBS's Nightly Business Report, in which I offer an Austrian take on competition as applied to the United-Continental merger:

For many observers, sheer size is evidence of monopoly, as is the elimination of a separate competing entity. These two beliefs, that size is automatically suspect and that the competitiveness of an industry is dependent on the number of firms, are both problematic and misunderstand the nature of market competition.

Comments

[Daniel Kuehn]

And you don't even get into the issue of the threat of entry, which as the rapid growth of Southwest has demonstrated is a very real threat to airlines. The threat of competition takes care of a lot of these concerns about monopoly pricing - but there's also a question of optimal firm size. Even if monopoly pricing was a potential problem, breaking up a monopoly firm to take care of the pricing problem might introduce additional costs by reducing the productivity of firms that are forced below the (technologically) optimal size. Anti-trust is a dicey business that people are far too eager to just jump into.

[Jayson Virissimo]

Some of the most competitive markets I can think of off the top of my head only have two or three firms. GPU manufacturing would be a good example.

[Rafael Guthmann]

One of the greatest discoveries of Modern Austrian economics is that competition has no relationship with the number of firms in the market. While some classical economists knew that, this knowledge stayed buried until Hayek and Kirzner rediscovered it.

[Jim Rose]

Richard McKenzie wrote an excellent book called ‘A defence of monopoly’. He pointed out that the serial competition is common.

A good example is if the advantage of being first or so much larger are so great, why did MS Explorer ever overtake Netscape? How did MS Word overtake WordPerfect, and before that, WordStar?

Most of all, Google should never have had a chance to get of the ground after the America Online Yahoo merger. This was one of the largest mergers ever. It is surprising the number of people who deny the power of competition while using that upstart of a Google every day!

[Shox R2 Shoes]

you're bad you go to Hell? I guess what Jimmy really is teaching us here is what most Americans believe about Christianity. Or maybe what LOST wants us to believe about Christianity.