Hi, Here is the note that I made regarding the saturation of free market economies. Note that this is several months old and I haven't been diligent in keeping it fully up to date... Forwarded message:
X-within-URL: http://einstein/ravage/free.market.monopolization.html
This is the theory in its current working version:
An unregulated (free-market) economy will inherently monopolize when, but not necessarily only if, the following are present:
- the commen assumption by current free market models that consumers are rational is irrational. A consideration of succesful marketing mechanisms and human psychology will clearly demonstrate that consumers are at best partialy rational. This is the fault in all anarchy models (eg crypto-anarchy), they assume in an axiomatic fashion that all participants will cooperate for not only their individual best interest but the cooperatives best interest without sufficient recognition that these may in many cases be in conflict. It is the same failing every form of government without a clear and proscribed list of individual and state rights and limits has, the assumption that some minimal set of behaviours or goals will satisfy all participants in all cases. The theory 'What is best for all is best for the one' is false.
- the importance of cooperation for mutual benefit that is axiomatic in current free market theories is false. Mathematicaly the prisoners paradox provides maximum payoff when defection occurs at a relatively high rate and in a random pattern. A primary goal of any business is not to ensure the survival of itself and it competitors but rather to eliminate competition through more succesful strategies. A rational consumer will act irrationaly at times because it is in their long term best interest. Therefore the distinction between rational and irrational consumers is false.
- the market is saturated, in other words the number of consumers at any given time are equal to or less than the service providers ability to provide that service (or resource). This means the long-term survival of firms is a function of retained market share and raw resource share control/ownership.
- the technology and/or start-up costs are high in material and intellectual factors. This minimizes the potential for new providers to start up. Providers will also require non-disclosure and other mechanisms to reduce sharing of information and cross-communications except under controlled conditions. Expect an increase in certifications and implimentation standards required to do business with the more succesful of these providers.
- an individual or small group of service providers have a small but distinct efficiency advantage in technology, manufacturing, or marketing. Over a long-enough time this market advantage will grow and as a result widen the 'technology gap' between firms.
- expect the most efficient firms to share their profit with the critical intellectual contributors. This further reduces the problem of cross-communication and new provider start-up.
- expect to see the more successful providers to join in co-ops with the less succesful providers. This will be under the surreptitous goal of 'developing technology'. It's actual goal will be to cause these smaller firms to commit resources to such enterprises. As soon as it is strategicaly advantagous the primary providers will break-off the co-op. This has the effect of further reducing the ability of the smaller providers to react in a timely manner to market changes or develop new technology due to resource starvation.
- expect to see the less efficient providers to combine in an effort to reap the benefits of shared market share and resources. Unless this partnering provides a more efficient model and there is sufficient time for that efficiency to develop these new providers will eventualy fail or be joined with other providers.
- expect to see the primary provider buy those less efficient providers that don't fail completely. These purchases will be as a result of some new or unexpected technology that will significantly increase the market share of the primary provider -or- it will be with the goal of eliminating this secondary technology and forcing those market shares to do without or use the primary providers technology.
- initialy prices for services will be low to promote purchasing but as providers obtain larger market shares their prices will increase over time and out of step with inflation and other market forces in order to widen the profit gap. The strategy is one of 'use it or starve'.
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