Quote:
Originally Posted by jbravo_123
My problem with unregulated free markets is that monopolies naturally form from them. Eventually one (or a small group) of companies get enough market share and figure out that it's much more cost effective to work together to control the market than it is to all out compete with each other so you get monopolies forming. Companies also tend to cut costs in areas like safety and ethics if there isn't a larger entity standing over them with a stick.
IMO, the best market is one that has a mix of regulation and a free market. Neither extreme works optimally.
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Monopolies rarely form "naturally" from an actual free market.
If companies are working together to fix prices, it is NOT a free market and is a per se anti-trust violation. That means treble damages. Good times.
And if several companies are working together, it is not a monopoly, it is an oligopoly. A monopoly has only ONE dominant company, not several.
It is not uncommon for a handful of companies to have 80% of a market, but the market still functions effectively and efficiently. It is sometimes referred to as the "Rule of Three". In a wide open market with a lot of players, eventually most of the smaller, inefficient ones get killed off and just 3 (or maybe 4) big companies dominate the market. It is a natural tendency in many markets (but not all) for consumers to settle around a small handful of dominant brands.
Nonetheless, that is enough to ensure competition. And none of the big companies is guaranteed to stay on top. An upstart can still knock them off and become one of the dominant companies.
Look at the auto industry. The Big 3 used to be Ford, GM and Chrysler. Most of the other US car companies went out of business or occupied niche markets.
But now Chrysler is a basket case and the Big 3 are probably Ford, GM and Toyota. And GM is in serious trouble. Nonetheless, it would be a hard argument to make that the the car market is inefficient.
The airline industry is even more extreme. It is dominated by American, Delta, and United - with Southwest arguably a fourth wheel. And the airline industry is absolutely cutthroat. Adjusted for inflation, airfares are cheaper than ever.
The government's role ought to be to ensure there are no illegal conspiracies between companies to fix prices and to block mergers of the dominant players. Other than that, they should stay out of the market.
Product safety and testing is a different beast - especially food and drug regulations. That is a proper government function.
