[en4bz]

Cable companies don't compete because the market has reached a Nash equilibrium. This is Game Theory 101. If one company lowers their prices or increase their services then as soon as others start seeing attrition they simply lower their prices in response until attrition stops. At the end of the day no one gains any customers and they've all lowered their prices. No one wins.

Similar things happen with turf wars. If I install services in one community then the incumbent can simply lower prices to match mine very easily. At the end of the day I've spent a bunch of money and may not gain any of my competitors customers. Even if my competitor is still paying off infrastructure in that region and may now be running at a lose the companies are so large one community isn't going to make a difference.

Even if you offer faster services the majority of people don't care, they just want to be able to watch Netflix as cheap as possible.

[argonaut]

Your first description isn't a Nash equilibrium because you're considering second-order effects (you're considering the reaction of other players to your changes), when Nash equilibrium only concerns itself with first-order effects - you assume other players do not change and if under that assumption every player is at the best action already, then you're in a Nash equilibrium.

I don't think cable companies are at a Nash equilibrium, but they may be at other forms of equilibrium that I'm not familiar with. Also this game is iterated so there are other (crucial) dynamics at play that I am not familiar with.

[en4bz]

Good point. Subgame perfect Nash equilibrium [1] would be more accurate since it applies to dynamic games.

[1] https://en.wikipedia.org/wiki/Subgame_perfect_equilibrium

[nerdponx]

It's not Nash equilibrium, but this is a standard result in industrial organization. Companies "collude" by threatening to start price wars. The threat of a price war is enough deterrent to prevent anyone from undercutting anyone else.

[rue]

> No one wins.

This assumes that all costs stay proportionately the same, _and_ that there is no other competitive advantage than price.