Re: My take on the State of the Union

Andreas Pour wrote:

>> Actually, it is a cartel, but yes it is a monopoly because it has 
>> monopoly power due to the nature of the market.
> 
> 
> So, I guess it is not necessarily a mistake to say "oligopoly is a 
> monopoly".
> 
If there is collusion, their function would be the same.  A cartel is
always collusive so, as I said, a cartel is a monopoly.  The important
distinction is that a monopoly will raise their price above the market
price even though it results in lower sales if this results in higher 
profits.  The OPEC cartel controls enough of the market that they can 
basically set the price by regulating production.
> 
>>> Beyond that, there is no difference between concentrated oligrarchy
>>>  and monopoly.
>> 
>> Yes there is.  I suggest that if you didn't take economics in college
>>  that you read a good economics text (McConnell Economics is the 
>> standard).
> 
> 
> I have studied economics, and in particular antitrust and monopoly. 
> Perhaps you should try to read some different viewpoints than mainstream
>  propaganda.
> 
Sounds like what a Leftist would say.
> 
>>> In both situations the player(s) maximize profit for the industry - 
>>> i.e. there is no real competition.  Even if there is no formal 
>>> arrangement like OPEC, there are mechanisms in place to ensure 
>>> group-maximizing behavior.
>> 
>> Sorry, what you said is wrong.  Unless there is collusion in an 
>> oligopoly, there is competition.  This competition *is* very real 
>> although the conditions are quite different than if there were a large
>>  number of suppliers.
> 
> 
> In concentrated oligopoly there is inherent collusion.  Why do you think
>  all the gas stations charge the same price and change prices at the 
> same time (in lock-step)?

Another Leftist canard.  If you drag out your economics text, you will see
that under ideal competition all suppliers charge the same price.  What
surprises me is that all the gas stations do NOT charge the same price.
How do you explain the ones that charge a higher price.  I accept what
classical economic theory says that companies that have market power are
able to charge more than the "free market" price.

This leads to the question of whether the companies charging more for 
gasoline are engaging in monopoly pricing.  The answer to this can not be 
found in their pricing.  The question is whether they are selling all of 
the gasoline that they have the capacity to produce.  Do you have any 
information on that?  I hope that it would be obvious even to a leftist 
that if they are setting their price so that they will sell all of their 
production that it is actually the market which is setting the price.

> It does not make sense for them to compete - and so one of the pricing 
> mechanisms used is a "market leader" who will change prices and the 
> others immediately follow suit.

And how is this different than ideal competition.

> That is not considered "price-fixing" by law, but still one company 
> controls the price.

Actually, that is the classical theory, but it doesn't seem to apply to
gasoline lately because the other normal part of oligopoly pricing isn't
present -- unchanging prices.
> 
> Then you have also interlocking directorships, trade groups, group 
> lobbying, ownership overlap, etc.
> 
> The result is if you study pricing partterns and profit margins in 
> concentrated oligopolies they do not differ much from monopolies.

And would that include oligopolies where companies sell product at a loss
to maintain market share.  How often does that happen with a monopoly?

> [ classical economics propaganda snipped ]
> 
> Spare me the trite propaganda.  Yes, profit is one motive, but only a 
> fool thinks it is the only one; and only someone gullible thinks 
> oligarchies comply with the law and don't fix prices (besides having a 
> number of sub silento mechanisms for reaching the same goal).
> 
> A competitive market in the modern world is, say, restaurants. If one 
> restaurant raises its prices, all the others don't immediately follow 
> suit - that's a sign of competitiveness.

No, it is a sign of a lack of organization in the market.  The retail 
gasoline market is much more organized.  You need only drive by several gas 
stations with their prices clearly posted.  Not so with restaurants.

> That is also absolutely not the case in the oil markets. You can say, 
> sure, that's b/c oil is a commodity

And I would be correct.  But the actual reason is that the Oil market is
organized and the restaurant market is not.

> and restaurants are not; but yet oil companies engage in significant
> branding to make their market seem less commodity-like in public
> perception.

Yes, you do get it.  And it is that product differentiation which gives them
the necessary market power to charge more than their competitors for what
is actually a commodity product.

> In any event, oil companies should make profit margins consistent with a
>  competitive commodity business (i.e., marginal profits, as happens with
>  unsubsidized corn farmers), but they do not.

Is this Neo-Com thinking?  Saying what profit they should make.  Corn
farming is not a natural resource recovery industry.  There is a short
supply of Oil and in the US there is a surplus of corn production.

> In most sectors, the industrialized world is basically oligarchy, and 
> using unrealistic, moral competitive models to understand them is not 
> just fruitless but asinine.  The only way to understand oligarchies is 
> to study them in particular.  The smaller the group of "competitors" 
> becomes, the easier it is to coordinate and the more stupid (for them) 
> it is to compete.  Imagine if only you and your brother sold oil in your
>  state.  Would you really engage in competition, or would you find some
>  subtle way to maximize your combined profits (imagine also you had no 
> morals about "being fair" to the consumer)?
> 
Again you make the classic false assumption that others appear to make with
the gasoline market.  If the government ordered gasoline prices reduced
tomorrow, what would happen.  Oh I forgot we already tried that once and we
all know what happened.  Do you think that there is more gasoline sitting
around that could be sold?  To make this clear, if Oil companies cut the
price of gasoline, where will they get the additional gasoline to sell to
meet the increased quantity demanded.
> 
>> The retail gasoline market is further complicated by the fact that 
>> there is a finite refinery capacity which is about the same as the 
>> normal quantity demanded, and a very inelastic demand.  This is a 
>> special case, and I do not know exactly how this functions.  However,
>>  I do believe that gasoline suppliers are pricing their product in 
>> order to sell all of it that they can produce -- this is not monopoly
>>  pricing as some on the Left have claimed.
>> 
>> 
>>> And I am not a "Leftist" :-).
>> 
>> Point taken, but you do sound like one.
> 
> 
> The fact that I am not gullible to "Righist" propaganda does not make me
>  a "Leftist"; I am also not gullible to "Leftist" propaganda, as most of
>  my posts to this list would tend to confirm.
> 
Your above posting contains several instances of believing the lies told by
the Left.
> 
>> In any case, saying that the six major oil companies constitute a 
>> monopoly is a Leftist position.
> 
> It's simply an informed position.

Information supplied by the Left.

> There is no ideology involved,

It is possible that you don't realize it, but there is ideology involved.

> other than skepticism of propaganda and desiring an understanding based
>  on actual facts (rather than distorted virtual reality theory).

So, you admit that you believe what the Left says about economics and you
say that classical economic theory is Rightist propaganda and you still
have the nerve to say that you are not a Leftist.  That is simply incredible.

--
JRT

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