[Nullabillity]

> The classic example is: Coca-Cola has a 95% market share of the cola market in some countries. Does it mean it has a monopoly? No.

Effectively, yes. Why is the market so disfunctional that a single company has effectively swallowed all competition?

> If it had 100% of the cola market, would it have a monopoly? No.

Err, yes.

> Because the cola market doesn't exist in isolation. Colas compete with all other sodas, with water, juices, etc. for a share of wallet and a share of stomach.

And AT&T wasn't a monopoly, since you could just walk to the person you want to talk to. Oh, wait..

[AnthonyMouse]

> Why is the market so disfunctional that a single company has effectively swallowed all competition?

This is actually pretty common in hypercompetitive commodity markets. The largest player has a slight cost advantage due to economies of scale, so they have the best price and everyone buys from them. But they still have no market power because their market share doesn't come from barriers to entry.

> Err, yes.

It's not necessarily a monopoly even at 100% when there are competitors who could immediately enter the market if the incumbent were to be so audacious as to raise prices by 4%, or do anything else the customer even mildly dislikes -- because that fact keeps them from ever doing it.

Notice that this is not how it works for Comcast, because it's not cheap or quick to wire a city with fiber, so they can get away with a great deal of abuse before anyone else would show up to compete -- even if they only had 50% market share, as long as the other 50% is another company doing all the same abusive stuff.

> And AT&T wasn't a monopoly, since you could just walk to the person you want to talk to. Oh, wait..

To be a substitute it has to be a practical alternative that can be used for the same purpose at approximately the same cost. Having to spend an hour walking is not the same cost as picking up the phone.

[timoth3y]

> This is actually pretty common in hypercompetitive commodity markets. The largest player has a slight cost advantage due to economies of scale, so they have the best price and everyone buys from them.

This is not true at all. Looking at actual competitive commodity markets for things like lumber, oil, copper, etc, we see a lot of players in the market. I can't think of a single commodity market where there is a monopoly.

Those times in history where a monopoly has occurred in commodities markets it has been grossly abused. IAR, from the trusts of the early 1900s to the cornering of the silver market one player controlling a commodity market has not turned out well.

[AnthonyMouse]

> Looking at actual competitive commodity markets for things like lumber, oil, copper, etc, we see a lot of players in the market.

Those are all things that come from the earth (so inherently have diffuse supply), sell into the global market (so the market is large and diverse, leaving space for upstarts to find a niche) and are of strategic interest to national governments many of which then act to ensure that an independent local industry exists.

Examples of markets where this actually happens: Coca Cola (as discussed), Walmart (in local areas), YKK in zippers, AB inBev in Brazil, Luxottica in eyewear.

It's also common for this to happen with open source software, e.g. Linux on embedded devices, OpenSSH as an ssh client/server, for many years gcc as a compiler for Unix-like systems (until Apple poured money into clang to make it competitive after FSF moved gcc to GPLv3), Android on phones, etc.

[timoth3y]

> Examples of markets where this actually happens: Coca Cola (as discussed), Walmart (in local areas), YKK in zippers, AB inBev in Brazil, Luxottica in eyewear.

None of these is the result of the "slight price advantage" and increased efficiencies you claimed. Luxottica is expensive and uses their vertically integrated monopoly power to keep competitors like Oakley out. Warby Parker gained success so quickly largely because of this dysfunctional system. Coke, where it controls the market it does so by controlling distribution, menus, and retail space, not by offering cheaper products.

> It's also common for this to happen with open source software, e.g. Linux on embedded devices, OpenSSH as an ssh client/server,

These are not monopiles. They are more akin to standards. It's like saying the kilogram has a monopoly. It's kind of true if you play with the meaning of the word a bit, but in terms of markets, there is no monopoly power.

[AnthonyMouse]

> Luxottica is expensive and uses their vertically integrated monopoly power to keep competitors like Oakley out.

The eyewear market is weird because opticians use free eye exams as a loss leader to sell expensive frames, and if you have insurance then the insurance is paying and customers aren't sensitive to price, so the market selects for expensive high margin frames even though they're an inexpensive commodity with low barriers to entry. (This is a primary reason why healthcare is so expensive in general.)

The scale advantage then isn't low "price" (because the market selects for a specific high price, namely the limit on what insurance will pay), rather the advantage is lower cost which leaves the seller with more to spend on marketing etc.

And this leaves a niche for the likes of Warby Parker to capture the segment of the market which is paying out of pocket and is actually sensitive to price.

> Coke, where it controls the market it does so by controlling distribution, menus, and retail space, not by offering cheaper products.

But it still sells at competitive prices. Having retail space gives them volume, not pricing power.

> These are not monopiles. They are more akin to standards. It's like saying the kilogram has a monopoly. It's kind of true if you play with the meaning of the word a bit, but in terms of markets, there is no monopoly power.

That's the point. They have overwhelming market share but minimal market power. If suddenly Linux cost a lot of money, people would switch to BSD.

[slededit]

Strange you ignored the greatest monopoly of all time, Rockefeller's Standard Oil. Despite getting split up in 1911, its successor Exxon is the largest non-government owned oil company in the world.

[barry-cotter]

Wouldn’t have been broken up under modern American antitrust law. Prices declined consistently and quality rose as they crushed their competitors through superior expertise, quality control, research and development and economies of scale.

[sigzero]

> Why is the market so dysfunctional that a single company has effectively swallowed all competition?

Because it has the best product. That doesn't make anything dysfunctional.

[nitwit005]

> Effectively, yes. Why is the market so disfunctional that a single company has effectively swallowed all competition?

If people just like their product more, what's the problem? There's no point in punishing them for being cheaper or more liked than the competition.

[tannhaeuser]

Anti-trust regulation isn't about punishment. It's about maintaining fair market access in the best interest of a civil society, and having an economical system with currencies, civil law, courts, etc. work for most people rather than just very few. In fact, if a democracy doesn't push against monopolies, it would just become a farce.

[markdown]

There may or may not be a problem, but it's still a monopoly.

One way it could be a problem is that it makes it extremely difficult for new entrants to appear. If Coca Cola pays for all the shelf-space in all the leading supermarkets, how is society ever going to experience my super-cola made from unicorn tears and sun-drops?

[ucaetano]

> If Coca Cola pays for all the shelf-space in all the leading supermarkets, how is society ever going to experience my super-cola made from unicorn tears and sun-drops?

Who cares? Antitrust doesn't exists to protect companies, it exists to protect consumers.

Cola is just a flavor of soda, which is just a type of drink, and can be easily interchangeable with an enormous number of drinks: water, juices, teas, etc.

As long as Coke's actions are not stopping competition in that larger market with the result of harming consumers, why should anyone care?

[Vinnl]

> Who cares? Antitrust doesn't exists to protect companies, it exists to protect consumers.

Is that not exactly what that example is about? I, as a consumer, will not be able to experience their super-cola.

[ucaetano]

Again, who cares? Consumer protection isn't about letting you taste some weird cola. It is about price.

Read the Supreme Court's definition.

[Vinnl]

But even then: if coca cola can prevent competitors from emerging, that removes downwards price pressure for them, so prices rise?

[smt88]

> As long as Coke's actions are not stopping competition in that larger market with the result of harming consumers, why should anyone care?

This makes sense as a theory, but in practice, monopolies never exist without abuse/harm. It's likely the only way to sell a single brand to wildly varying customers with different tastes.

[ucaetano]

But that isn't a monopoly.

Imagine Coca-Cola creates a new flavor, with a taste so unique that nobody else is able to replicate it.

Is that a monopoly? Is Coca-Cola abusing its power?

No, and no.

[smt88]

As others have pointed out, you just seem to be using a different definition than the rest of us are.

A single, unreplicated product is never considered a monopoly. A monopoly implies that customers don't have an alternative.

[matthewmacleod]

That’s not a particularly convincing argument - it’s like saying that Sony has a monopoly in the PlayStation market - possibly true, but not that useful!

[ucaetano]

Exactly: you can absolutely always define a market here a company has a close-to-100% market share.

That's why, to actually talk about a monopoly, you need to very precisely define the market.

Take Facebook: Facebook has a monopoly in online, blue-themed social networks owned by Harvard dropouts.

It doesn't have a monopoly on social networks, on communication, on online networks, on online ads, on online ads in social networks, on blue-themed online social networks, and even on blue-themed online social networks with a timeline feature.

[Nullabillity]

But being blue isn't a defining feature of Facebook (or any other social market), so it's not useful for defining the market that it operates in.

[ucaetano]

> But being blue isn't a defining feature of Facebook

Indeed, nor is it a defining feature of the market. That is exactly my point: if your labe of "monopoly" relies on a non-defining feature of a market that sets it apart from other markets (meaning that there is little competition between borders), you definition of monopoly is useless.

[RugnirViking]

If somebody can usefully use both commodities at once - (using facebook and twitter) I would say that those two companies aren't competing to the point where they can be called the same market.

[ucaetano]

Of course they are. They are competing for eyeballs, user actions and for ads.

[Alex3917]

> That’s not a particularly convincing argument - it’s like saying that Sony has a monopoly in the PlayStation market - possibly true, but not that useful!

Except for that anyone can spend 30 seconds looking up how Coca Cola abuses their monopoly position to prevent competition; Richard Branson is perpetual the case study.

[ucaetano]

> Effectively, yes.

No. You can always create a market where a company has a "monopoly" (in the market share sense of the word).

> Why is the market so disfunctional that a single company has effectively swallowed all competition?

Where did you get that from? This is a sign that you don't understand the market you're talking about.

> And AT&T wasn't a monopoly, since you could just walk to the person you want to talk to. Oh, wait..

That doesn't make any sense, you're not even wrong.

It isn't just because you can create a mental analogy about a subject you don't understand, that the analogy is actually valid.

[sonnyblarney]

" Why is the market so disfunctional that a single company has effectively swallowed all competition?"

In most places there just isn't any competition really. It's a brand war.

Coke taught the locals to love Coke. And so they do.

It's more of a mind share / branding monopoly - although there are some issues with distribution as well.

[smt88]

It's not a brand war in a lot of places. Coke is notorious for getting favorable deals (e.g. water rights) from local governments that give them effective monopolies.

[ucaetano]

Every beverage company does the same (see Nestle).

[tylerhou]

You can easily substitute juice/off-brand colas for coke. You can also easily substitute FaceTime/Skype/Hangouts for phone calls (provided you’re not using mobile data)...

[scythe]

>Effectively, yes. Why is the market so disfunctional that a single company has effectively swallowed all competition?

Part of the reason might be that Coca-Cola depends on decocainized coca leaf for its characteristic flavor, but regulations make it (effectively) impossible for upstarts to access this particular herb. Coca-Cola was grandfathered in from a time when coca leaves were legal.

[imgabe]

But you couldn't walk to any person to talk. Not in any way remotely similar to how you can drink water instead of Coke.