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More “great” economics from Vox:

What happens to markets with weak competition?

Three things:

High prices
Price discrimination
Bad customer service

Read the rest. While I’m surely not satisfied with Time Warner, the article’s discussion of competition leads to a little less satisfaction. First of all, in monopsonistic markets, less competition means lower prices, so markets with weak competition do not necessarily lead to high prices. Maybe the author means product markets, but that’s different than “markets.”

Second, points one and two can’t go together. Are prices high under monopoly? Or are they diverse? They can’t both be high and at the same time low for some people and high for others (I guess you can argue that even the low prices are high). Finally price discrimination “solves” the problem of monopoly – by charging everyone their WTP, then we have no under provision. Yes that may lead to general dissatisfaction, but LESS than we would see if monopolists charged a uniform high price, since many customers would not be transacting.

Here’s more:

Last but by no means least in an uncompetitive market there is little reason to invest in customer service.

Little reason? Doubtful. Monopolies don’t remain monopolies long when they exist. It’s precisely the high profits and crappy service that gives entrepreneurs something to shoot for. Does customer service at Time Warner stink? Yes, compared to what Wegman’s does for us, but it’s pretty decent compared to, say, the IRS. And remember none of us HAS to patronize TWC.

Read the rest here. http://feedly.com/k/1m0obsT

One Response to “This is Profoundly Wrong”

  1. JB says:

    All true. Though monopolies might have little reason (incentive) to invest in customer service if an alternative, such as investing in rent seeking (lobbying to form legal barriers to entry) provides a higher return.

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