Friday, June 21, 2013

"Monopoly power" doesn't mean what you think it means...

Posted by dkuehn at 12:49 PM
...if you think it means 100% or even sizable majority market share.

If you think it means something else then it might mean what you think it means.

14 comments:

  1. Squarely RootedJune 21, 2013 at 1:12 PM

    IF MARKETS PRODUCE MONOPOLIES THEY MUST BE EFFICIENT

    DON'T YOU READ HAYEK!?!?!?!?

    THERE ARE NO POSITIVE LIBERTIES

    FREE BANKING GOLD STANDARD TAXATION IS THEFT

    OBAMACARE

    ReplyDelete
    Replies
    1. Daniel KuehnJune 21, 2013 at 1:21 PM

      Wait - Obamacare is the gold standard?

      ;-)

      More seriously (but not much more) a passable Turing test entrant would never pair up free banking and the gold standard.

      Delete
    2. John SJune 22, 2013 at 3:22 PM

      (+half-notch seriously) Not quite sure what you mean. Do you mean that Free Banking advocates don't support a gold-based system? Kurt Schuler and Larry White come to mind as two who are quite supportive of gold. http://www.freebanking.org/2012/02/11/more-on-the-gold-standard-with-regret/


      Re: Apple--how do you feel about its design patent lawsuits? I feel they constitute a large part of its oligopolistic power; they've clearly used lawsuits or threats of lawsuits to attack rivals (notably Samsung and HTC).

      But I really don't see how Apple can even pretend to "own" the touchscreen slab concept; phones were pretty obv evolving in that direction. LG Prada was at the very least a case of concurrent, independent innovation.

      Delete
    3. CurrentJune 22, 2013 at 5:58 PM

      Apple don't pretend to own the touchscreen slab concept. Their patents are on more detailed aspects of their operation. For example "slide to unlock" is patented, though that patent is likely to be struck down.

      Mostly the other companies have been sued because they have been lazy and they haven't made the trivial changes necessary to design around Apples patents.

      The idea that the smartphone market is even ogliopolistic strikes me as silly, there are many vendors. Even Huawei do reasonable smartphones now. The high margins Apple continue to have in this areas are more to do with aesthetics and status-symbol appeal. They're also because the high volumes they sell allow them to do much more cost reduction than other vendors. For example, to make the iPhone they source chipsets from several different vendors, some iPhones have a Bluetooth chip from company X and other from company Y. Most other mobile phone makers don't do that, they tie themselves to one company because the design cost is lower.

      Perhaps the "Smartphone" market is competitive but the "Smartphone-as-jewellery" market is less so.

      Delete
    4. John SJune 22, 2013 at 10:58 PM

      Three of the four design patents in question were related to the touchscreen slab concept. The drawings make it quite clear.

      http://techcrunch.com/2012/08/20/in-this-complex-patent-battle-apple-and-samsung-take-their-marketing-strategies-to-court/

      Delete
    5. CurrentJune 23, 2013 at 12:56 PM

      Well, there all about touchscreen slab computers, but they don't really patent the concept. They patent specific aspects of how it can be done. Some of them are about patenting a particular design aesthetic, I'd argue that patents shouldn't cover that, but it's easy enough to make a different physical design. The other patents are mostly easy to work around. The 3G essential patents are of-course impossible to work around because they're burned into the standards, but there's a cross-licensing system in place for those anyway.

      Delete
    6. Grant McDermottJune 24, 2013 at 6:29 PM

      Comment of the week.

      Delete
  2. PiyoJune 21, 2013 at 1:20 PM

    I don't think it *means* that, but I think a company lacking a sizable market share *entails* that it isn't a monopoly. If I'm wrong, I'd genuinely like to know why. In the case of Apple - I'm guessing this post is inspired by that discussion - "monopolistic competition" might apply somewhat. However, that doesn't seem like a slam dunk either. A lot of Apple's market moves lately have been ascribed to price pressure exerted by their primary competitors.

    Again, if I'm wrong, let me know where.

    ReplyDelete
    Replies
    1. Daniel KuehnJune 21, 2013 at 1:22 PM

      Being a monopoly and having monopoly power are two different things. Monopolistically competitive firms have monopoly power, earn monopoly rents, etc.

      Apple is definitely at least monopolistically competitive - probably an oligopolist (I don't know the industry). The corner market is monopolistically competitive, after all - Apple certainly is.

      Delete
    2. Ken PJune 21, 2013 at 5:59 PM

      To the extent they have monopolistic power, there is no reason to expect they can hold onto it. There are $20 tablets being made in India.

      The Apple situation looks to me like the typical situation where high profits attract competition then margins shrink. Their Ace in the hole, as I see it, is Siri. They may easily flop on that.

      Delete
  3. PiyoJune 21, 2013 at 1:31 PM

    Maybe I've misunderstood, but I took Krugman's example to depend crucially on Apple obviously having *more* monopoly power than 1960s GM. Is that wrong? If so, how? If not, then I don't see how it's true. If anything, it would seem that GM had far *more* monopoly power.

    ReplyDelete
  4. RyanJune 21, 2013 at 2:15 PM

    I reserve "monopoly power" to refer to near "true-"monopolies.

    You will be clearer and win more fights if you say "market power" instead.

    ReplyDelete
    Replies
    1. Daniel KuehnJune 21, 2013 at 2:39 PM

      "Market power" is fine too (although a little less precise), but monopoly power is not used by most people (well, most economists) the way you are using it. A good definition, it seems to me, ought to make sense and be popular (that's the standard I applied in my post on "heterodoxy"). You've got the former, but not the latter it seems to me (unless you're having a conversation with people not familiar with economics).

      Delete
    2. RyanJune 21, 2013 at 3:00 PM

      I prefer using "market power" because oligopolistic or monopolistically competitive firms are typically far more constrained than monopolies; depending on your assumptions they may act identically to competitive firms - as I'm sure you know. I don't *like* that economists use the term "monopoly power" to refer to less extreme situations because it gives the impression to the lay public that, say, your bank or insurance company automatically has all sorts of arbitrary power, when it's actually the case that you would need to examine the matter much more closely before making that determination.

      Delete

All anonymous comments will be deleted. Consistent pseudonyms are fine.

Subscribe to: Post Comments (Atom)