DPQ

1. DPQ

2. DPQ? • Digitally Powered Quad • Deliberately Pruned Quince • Delicious Pepperoni Quiche • Deadly Poisonous Quiver • Dave Purposely Quit • Dreaded Pop Quiz

3. DPQ • Digitally Powered Quad • Deliberately Pruned Quince • Delicious Pepperoni Quiche • Deadly Poisonous Quiver • Dave Purposely Quit • Dreaded Pop Quiz

4. dreaded pop quiz

6. Big Business and Government

7. What is a monopoly?

8. What is a monopoly? • Monopoly: one seller. Examples, old regional phone companies, Alcoa in old days, railroads in old days. Could even by a tiny store if it’s the only one around... i.e., daboyz ‘nade stand (for a fleeting moment)

9. Monopolies • Monopoly causes harm not just by charging prices higher than they would be with competition, it also affects the total wealth of an economy

10. Monopolies • Monopoly causes harm not just by charging prices higher than they would be with competition, it also affects the total wealth of an economy • Monopolies cause consumers to buy less at the higher price and cause inefficient use of scare resources that have alternative uses

11. Monopolies • Monopoly causes harm not just by charging prices higher than they would be with competition, it also affects the total wealth of an economy • Monopolies cause consumers to buy less at the higher price and cause inefficient use of scare resources that have alternative uses • Luckily, monopolies almost impossible to maintain without government protection

12. More on Monopolies • But they do exist: just take a taxi in New York… or try to, especially in the theater district on a rainy night at 11 p.m.

13. More on Monopolies • But they do exist: just take a taxi in New York… or try to, especially in the theater district on a rainy night at 11 p.m. • If cabs and drivers were freely allowed to compete, fares would come down and there would be more prosperity

14. What’s an oligopoly?

15. What’s an oligopoly? • Oligopoly: a small number of sellers who may cooperate with one another in setting prices; can produce results similar to a monopoly

16. What’s an oligopoly? • Oligopoly: a small number of sellers who may cooperate with one another in setting prices; can produce results similar to a monopoly • Examples: Four companies control 89% of U.S. wireless market (AT&T, Verizon, Sprint, T-Mobile)

17. What’s an oligopoly? • Oligopoly: a small number of sellers who may cooperate with one another in setting prices; can produce results similar to a monopoly • Examples: Four companies control 89% of U.S. wireless market (AT&T, Verizon, Sprint, T-Mobile) • Usually defined by having xx% of market share

21. What’s a cartel?

22. What’s a cartel? • Cartel: an international syndicate, combine or trust formed specifically to regulate prices and output in some field of business

23. What’s a cartel? • Cartel: an international syndicate, combine or trust formed specifically to regulate prices and output in some field of business • OPEC (Organization of Petroleum Exporting Countries) is the classic cartel

24. What’s a cartel? • Cartel: an international syndicate, combine or trust formed specifically to regulate prices and output in some field of business • OPEC (Organization of Petroleum Exporting Countries) is the classic cartel • But even OPEC cannot control oil prices... consumers respond to higher prices, OPEC members cheat, alternate fuels, technology such as Prius

25. Anti-Trust Laws

26. Anti-Trust Laws • Some huge biz organizations were known as trusts, hence “anti-trust” laws passed by governments

27. Anti-Trust Laws • Some huge biz organizations were known as trusts, hence “anti-trust” laws passed by governments • Intent was to prevent monopolies and cartels from artificially raising prices

28. Anti-Trust Laws • Some huge biz organizations were known as trusts, hence “anti-trust” laws passed by governments • Intent was to prevent monopolies and cartels from artificially raising prices • Sherman Anti-Trust Act of 1890:

29. Sherman Anti-Trust • Sherman: Not specifically intended to prevent the dominance of an industry by a specific company. Any company that "got the whole business because nobody could do it as well as he could" would not be in violation of the act.

30. Sherman Anti-Trust • The law attempts to prevent the artificial raising of prices by restriction of trade or supply. In other words, innocent monopoly is perfectly legal, but acts by a monopolist to artificially preserve his status, or nefarious dealings to create a monopoly, are not.

31. Anti-Trust Laws, Take 2 • However, we always look at ________ not intent

32. Anti-Trust Laws, Take 2 • However, we always look at ________ not intent • And as you read……….. Yep, business soon learned to lobby government to use anti-trust laws to restrict competition

33. Anti-Trust Laws, Take 2 • However, we always look at ________ not intent • And as you read……….. Yep, business soon learned to lobby government to use anti-trust laws to restrict competition • Some of the most famous anti-trust cases involved business that charged lower prices

34. More Anti-Trust Stuff • Morton Salt, Borden milk, Microsoft giving away Internet Explorer

35. More Anti-Trust Stuff • Morton Salt, Borden milk, Microsoft giving away Internet Explorer • Problem is the issue of how much of the market a company “controls”

36. More Anti-Trust Stuff • Morton Salt, Borden milk, Microsoft giving away Internet Explorer • Problem is the issue of how much of the market a company “controls” • In actuality, in a free market, competition will dictate your market share, if you’re really efficient it can get quite large... iPod, Google

37. Anti-Trust redux • Consumers win when companies like Wal*Mart lower prices, but benefits gets lost in the confusion

38. Anti-Trust redux • Consumers win when companies like Wal*Mart lower prices, but benefits gets lost in the confusion • Also forgotten is that alternate products can substitute when prices get too high… i.e., limits on newspaper ownership in one city are absurd with internet, news radio, etc.

39. Anti-Trust redux • Consumers win when companies like Wal*Mart lower prices, but benefits gets lost in the confusion • Also forgotten is that alternate products can substitute when prices get too high… i.e., limits on newspaper ownership in one city are absurd with internet, news radio, etc. • Key to monopoly is not market share, but the ability to keep others out

41. Regulatory Commissions

42. Regulatory Commissions • ICC, Public Service Commissions, SEC, FDA, EPA, FEC, FCC, etc. etc. etc. etc.

43. Regulatory Commissions • ICC, Public Service Commissions, SEC, FDA, EPA, FEC, FCC, etc. etc. etc. etc. • Functions are nearly impossible to do properly

44. Regulatory Commissions • ICC, Public Service Commissions, SEC, FDA, EPA, FEC, FCC, etc. etc. etc. etc. • Functions are nearly impossible to do properly • Most onerous with power companies

45. Regulatory Commissions • Only the actual functioning of the market could reveal what the price should be, with less efficient firms being eliminated by bankruptcy

46. Regulatory Commissions • Only the actual functioning of the market could reveal what the price should be, with less efficient firms being eliminated by bankruptcy • Cost of electricity can vary tremendously… time, fuel sources

48. Regulations under Obama • Tremendous increase in number of agencies and regulations under Obama and Democrat Congress

49. Regulations under Obama • Tremendous increase in number of agencies and regulations under Obama and Democrat Congress • New ‘super’ consumer agency is regulating ATM fees, checking costs, profit margins... turning banks into regulated utilities

50. Regulations under Obama • Tremendous increase in number of agencies and regulations under Obama and Democrat Congress • New ‘super’ consumer agency is regulating ATM fees, checking costs, profit margins... turning banks into regulated utilities • EPA is proposing regs that will cost trillions and ship millions of jobs overseas