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Comment by Retric | Hacker News Reader

And some people are flat out wrong. Monopolies at the local level are very common historically. Small towns would have 1 blacksmith for example as there was not enough work for 2 and transportation was prohibitive.

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Yup, and it feels like the blacksmith allocation is very similar to last-mile infrastructure investments. Its not worth putting two sets of infrastructure because either the existing operator is going undercut the new entrant, putting them out of business, or the competitors are going to split up some fraction of the market each, but now, both companies and their customers have to bear the full-cost of capital to wire and maintain the whole market area twice.

What's the problem then if there's not enough work for 2? You're close to a barter economy at that point. The blacksmith can't gouge the customers he depends on for everything else.

Individual sales matter less to the blacksmith than their customers. So, they might not gouge their customers but padding bills is common behavior after all selling 10% less at 20% higher profit is a net gain. Consider how important the internet is to you vs an extra 20$ a month in profit is for a multi billion dollar company.

Its not padding though. Its picking the right business where the market will accept higher margins than usual.

This is not a moral judgment. It is simply the seller doing what is in their best interest, just like they would in a competitive market.

The difference is that in a competitive market, this self-interest happens to lead producers to do what is in the public interest, but in the monopoly case it generally leads to lower production and higher prices than would be optimal. For more explanation, here's a Wikipedia article that jibes with my college Intro to Econ class:

https://en.wikipedia.org/wiki/Monopoly_price

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