[AnthonyMouse]

I think you may be ignoring the shadow that long-standing laws cast on culture and practice.

The benefit from merging to monopoly is that you can avoid all the negative pressures that come from extreme competition. You can work 40 hours a week and not cut corners without worrying that someone who does will beat you to market. But that only works if you merge to monopoly -- two competitors merging when there are still five others doesn't get you that. And even if there are only two competitors at present, having them merge doesn't preclude the possibility that some others will spring up as soon as the ability to charge monopoly/oligopoly prices is on the table (which is why the antitrust authorities may not bother you in that case).

To get the benefit (and thus make it worth doing at all), you have to know that you can keep doing it -- that if another competitor shows up with the credible threat of breaking your monopoly, you can merge with them too. And if you can charge monopoly rents then that is exactly what would happen: Anyone qualified and willing to pose a credible competitive threat will threaten to enter the market and then it will become worth it for you to buy them out because retaining the ability to charge monopoly prices and continue working "only" 40 hour weeks is worth having to share the market, provided there are a sufficiently small finite number of such qualified people who would have to be cut in.

But you aren't guaranteed to be able to keep doing that without inviting antitrust scrutiny, especially after you become established. And if you can't be sure regulators will allow you to do it as many times as necessary then there is no incentive to start because the benefits only accrue as long as you can hold the monopoly.

[mniejiki]

Except you were talking about startups originally, don't change the scenario when someone points out flaws. Startups don't have the power or money to enforce a monopoly.

More than that, you're ignoring the reality of a merger which would be a lot of corporate politics ending up with most of the originals founders getting kicked out. The handful who played the game the best will end up getting the whole pie.

[AnthonyMouse]

>Except you were talking about startups originally, don't change the scenario when someone points out flaws. Startups don't have the power or money to enforce a monopoly.

Where did I stop talking about startups? All the participants, including startups, that compete for the same market would have the incentive to merge or collude, but only if they can ensure that no one defects or fails to join, because the first defector breaks the monopoly (especially in software where there is effectively infinite reproduction capacity). And they (startups included) could reliably do that with contracts and buyouts if it wasn't illegal, in any market with sufficiently few qualified participants. But it is illegal, which is why even startups don't -- not because it will necessarily be enforced against the startup during the first merger, but because they know that if it works and they ultimately achieve the end goal of a monopoly or cartel, that is what will raise antitrust scrutiny. So we don't start down that road because we know where it currently goes.

Also, I never intended to limit what I'm talking about to startups: I used a startup as an example, but this applies generally. Non-startup small businesses could benefit from working together in similar ways. (As could large businesses, though that quickly becomes the exemplification of why we don't allow it -- again, we still need something to address that.)

And I would also point out that trotsky started talking about mergers so I wrote to address that, but collusion would probably be easier and more manageable, especially if it could be legally enforced between business entities through contracts.

>More than that, you're ignoring the reality of a merger which would be a lot of corporate politics ending up with most of the originals founders getting kicked out. The handful who played the game the best will end up getting the whole pie.

How, if they all have to continue colluding in order for it to work? If you have unhappy former competitors they can quickly become happy future competitors. The only deal that works is the one that makes all the former competitors better off than they would have been otherwise. That might involve some of them not being involved in the operations anymore, but they would still get a piece of the pie.