[mcv]

One thing that they have often done in the past, is to temporarily drop their prices to outcompete newcomers, making it impossible for newcomers to outcompete them, and raising their prices back up once the newcomer is gone. The established monopolists always have deeper pockets than the newcomers. I'd love to see how you stop that without regulation.

[ludwigDual]

> One thing that they have often done in the past, is to temporarily drop their prices to outcompete newcomers, making it impossible for newcomers to outcompete them, and raising their prices back up once the newcomer is gone.

Could you give examples of this happening? When the prices are low that sounds like a good outcome for their customers. Assuming the price drop doesn't affect other aspects customers care about like quality.

The problem is when prices are raised above what they would otherwise be in a competitive market. You phrased this as "once the newcomer is gone", but there isn't anything preventing another newcomer from emerging, or several. The action of raising prices is openly visible to the market. This will attract entrepreneurs to the industry as a result of the perceived success of the monopolistic firm. In other words greedily raising prices above what the market wants to pay is a suicidal move for a single firm that relies on its customers to continue to buy whatever it is selling. This opens a market opportunity for newcomers where it did not exist before the price hike as customers would be encouraged to look for an alternatives.

Monopolies backed by force are not reliant on their customers' voluntary decisions in this way so the analysis above only applies to situations that prevent forcing customers to choose a particular firm against their wishes.

[mcv]

It is explicitly why Standard Oil was broken up. Look up pretty much any anti-trust case. It's very common, and the reason it's not even more common, is because it's explicitly illegal by anti-trust law.

> When the prices are low that sounds like a good outcome for their customers.

No, because it's only temporary. They only lower the price to drive the competitor out of business, and once they're out of business, they raise the prices again.

> there isn't anything preventing another newcomer from emerging

Yes there is: investment. If every newcomer goes out of business like that, that makes it a bad investment to enter that market. You are already at a disadvantage entering a new market because of the investment needed. If you then can't recoup those costs, there's not much point in even trying. And the established big players can and will drop their prices to run you out of business unless stopped by regulation. Your argument only works if you ignore investment costs necessary to enter a market.

There's literally more than a century of legal history behind this.