Frost wrote:Monopolies cannot be considered being a single seller of a good, or else practically every business is a monopoly. I'm not even sure if it's quite possible for there to be truly homogenous goods. Each business is unique in some sense and therefore offers different goods. For example, buying a car from a car dealership is not a matter of selecting from homogenous goods, but rather each dealership offers a unique good due to the difference in so many factors involved in providing that good.
If you follow that line of reasoning you conclude that every individual good (with the possible exception of elementary particles like electrons!) is different from every other and they change from one moment to the next. That seems to me to be a reductio ad absurdum. Clearly, in order to make any sense of the world, we classify things and regard members of a class as being the same as other members of that class for practical purposes.
Every individual item sold by every supermarket is unique and it changes from one second to the next as it slowly rots. But if there was only one supermarket chain in a market then that chain would hold a monopoly in the class of goods called groceries.
Frost wrote:That a single seller charges higher prices does not make it a monopoly due to the dynamics of exchange. In a free market, exchanges are voluntary, and the seller cannot force the buyer to buy at a particular price.
I already agreed in my previous post that even in a single-seller market (which is by definition a monopoly) the price of the goods is, by definition, the free market price because only market forces are operating. But I gave an example in that previous post to show that in this free market prices can still be higher than they would be in a non-monopoly - i.e. in a market with more than one seller. As I said, one reason why prices can still be higher is that there is no competition to maximise the efficiency of that single supplier's internal production processes.
Also, as I said, if you re-define the word "monopoly" to mean a market in which something other than market forces are operating then you are committing a begging the question fallacy. i.e. you are attempting to show that monopolies cannot arise in free markets by defining a monopoly as something that doesn't arise in a free market.
Frost wrote:If I have a unique item I am selling on e-bay, does that mean I am a monopoly? Should the government come in and determine what the fair price should be? Based upon what if I am offering a unique product? Furthermore, I cannot force the buyer to buy at any particular price.
It depends how narrowly you define the term "unique". As discussed above, every seller could be defined as having a monopoly or not a monopoly in a particular market depending on that defintion.
Frost wrote:I suppose we could use the classic well example where there is one person that owns the only water source anywhere around and he sells to the town, ...
Incidentally: Using your argument above, even if there were multiple wells, you would presumably argue that each water product is different and has different unique selling points (perhaps hard water versus soft water) and that therefore each well-owner could be argued to hold a monopoly on their particular product?
Frost wrote:...and he one day decides to charge exorbitant amounts. In clear examples, this seems to be an appropriate area for government intervention to avoid coercion of procurement of basic necessities for life. However, in instances of natural disaster, for instance, the mere rising of prices is not monopolistic since it is allocating scarce resources.
To be clear: It is monopolistic by definition
(there is a single seller). What you are arguing is that this monopoly still results in a fair market price for the water which, given the conditions in the water market at that time, is appropriate to the circumstances and confers more benefit to the population as a whole than any form of control by external forces would.
Frost wrote:People want it so that poor people can buy the product as well, but if it sells out, poor people cannot buy it anyway.
Yes, a higher price will certainly mean that this product sells out more slowly than a lower price. To maximise his profits (in accordance with the principles of free trade) this water seller must judge how high he can push the price and still sell all of his water. The only limit to the price is the point where all the water does not sell. If there are no competing wells then it makes sense to push the price higher and sell to only the richest. The water will still all sell eventually won't it?
If I were this seller, and I owned a finite quantity of water, and there were no other sources, and my only consideration was maximising profit, I might consider allowing all but the richest to die of thirst and sell the water to just that one small group. It would sell more slowly but I'd get more money in the end. But if there were other sellers they'd spot the gap in the market and sell to the next poorest group for slightly less. I'd then have to drop my prices to compete because the richest would then also have a cheaper source of water.
Also, if there were no other sellers I would have no incentive to maximise the efficiency of my water collection apparatus (a.k.a. bucket and rope). It would still all sell in the end. But if there were other sellers they might spot that and collect their water more efficiently, satisfying the market before me, and I'd be left with excess unsold water.
So, unless my reasoning is way off, I don't see how your argument about single-seller markets (A.K.A. monopolies) works.
If we widen the discussion from single sellers, we might speculate that the rich group might use some of this precious water as a kind of currency to pay the poorer people to provide services of various kinds for them. Given that the alternative is dieing of thirst, I guess this water could be quite persuasive. I suppose that would literally be the trickle-down effect in action!
Frost wrote:The problem is, without economic understanding, people are all too quick to label something as "predatory" or "monopolistic." While there are some rare instances which justify legal intervention, that is quite rare on a free market and such violations must be approached with economic understanding and seen as gross violations of the rights of others (such as the well example).
Monopolistic it clearly is, by definition. "Predatory" is usually used as a value judgement term for ruthless exploitation. In this discussion I'm not particularly interested in jumping to value judgements yet. I'd prefer to start by trying to analyse the arguments.
"When the seagulls follow the trawler, it is because they think sardines will be thrown into the sea." - Eric Cantona.