Short SightedReader comment on: Steel Penalty Submitted by ben (United States), Jun 9, 2010 09:25 Standard oil would open a gas station in a new neighborhood next to a competitor and sell gas at a loss. The competitor could not compete and was forced to close. Without competition, what does Standard Oil do? Jack up their prices. Nobody in their right mind would open a gas station next door again because the market power of standard oil would allow it to undercut the price at a moment's notice. The end result, an effective monopoly. Only when the strong arm of government busted up the monopoly were free market forces unleashed. How is this different from China dumping its steel products in the US? Note: Comments are moderated by the editor and are subject to editing. The Future of Capitalism replies: Different companies may choose to build market share in different ways. Some gas stations or steel makers may choose to charge low prices, others to spend money on advertising. I don't know that the market share of the chinese steel makers is so big just now as to make them a monopoly. If they were, they'd be charging monopoly prices, rather than cheap prices. This is the problem with government regulation of prices. If the firm charges too low prices, the government says the firm is trying to build monopoly market share. If the firm charges too high prices, the government says they are taking advantage of monopoly market share. You end up in essence outlawing competition based on price, leaving companies to compete instead based on who can come up with the most clever television commercials. How does that benefit consumers? If anyone has monopoly pricing power here it isn't the chinese but the American firms, who have enough control over the political levers of the government to get the government to set the price in a way they want. Other reader comments on this item
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