The statement:
"I'd like more competition in field X"
is functionally (game-theoretically) equivalent to the statement:
"I'd like to strip the current and future actors in field X of (some/most/all of) their power."
As an example, competition between states strips states, and especially those trying to use the state to gain their own goals of effectively all their power.
For instance...a state in close competition with other states that wants to prohibit abortion cannot. Mom can decamp to a nearby state with no such prohibition.
A state that wants a high marginal tax rate cannot. The rich folks move out...to lower marginal tax rate states.
A state that wants strong regulation on business cannot. The business moves to another state with lower regulation.
If you allow competition among barbers? Barbers have no power. If you allow competition among schools? Teachers lose their power. Very simple. Where there is competition, there is no power. Where there is no competition, there is power.
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Sometimes competition results in a winner-take-all situation, and a self organized monopoly.
One auction house often comes to dominant a field.
One manufacturer often dominates a field, e.g. Caterpillar in construction, John Deere in ag equipment.
What does it mean to get "more competition" in such fields? How does one get more competition in art auctions? Will customers go with a new entrant, or pay extra to use the established houses?
Competitors have nontrivial power to decide how to compete, e.g. Apple vs. Commodore vs. DEC vs. Microsoft vs. IBM, East Germany vs. West Germany, etc.
So, where there is competition, the competitors have less power over their customers. But even then, you have network effects, stickiness, etc.
HHH,
welcome, and thanks.
RSF,
In Art auctions (your example), the question is whether Sotheby's is making silly $ above and beyond the value of their service. If Sotheby's is charging 5% to sell a van Gogh for 70 Million...but it only costs them 0.5 million to have the auction...Then it's worth on the order of $2 million for Frank to enter the art auction business, and charge only 3% to sell the van Gogh. IF Frank is credible...it's also worth nearly 1.5 million to the owner to go with Frank.
Of course, Sotheby's spreads FUD, explaining that Frank is unreliable...and the apparent gain from using Frank will be eaten up by the fact that selling through Frank, it'd only sell for $50M. And they may well be right. But if Lloyd's of London got into the business...well, that's a different story. They know everyone too...and were already insuring the painting. So, maybe Lloyds can enter, but Frank can't.
How monopolistic an industry is (how poor the competition is) is often understood by economists to be the amount above marginal cost that the product sells for. IF the product sells for marginal cost (including labor, and the rental cost of capital -- near 5%)...then the system is competitive. If John Deere makes tractors for $1000 (all costs included) and sells them for $2000, then someone else (Toyota) should make the tractor for $1100 (less experience), and sell it for $1800....making $700 pure profit. Some folks will switch. IF the Toyota tractor is good enough to be worth the $200 less than the JD tractor, those folks will stick with Toyota tractors.
Factor in uncertainty, future expectations. There is still some profit margin at which it is valuable for some new entrants to join a business... and folks selling at near marginal cost can get LOTS of customers.
P.S. Actually, the country that built the Berlin Wall to keep their customers in was about the worst counterexample I could have come up with, wasn't it?
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