Essays Competitive Forces

At age 4, when league play starts, they were bigger than their peers, and so got more coach-attention.Bill Gates's middle school had a spare computer.They identify three structural characteristics: (a) The number of sellers is "at least as large scale economies permit"; (b) there are no "artificial inhibitions on mobility and entry"; and (c) the products offered have "moderate and price-sensitive quality differentials." Within that market structure, the conduct among competitors should have these six characteristics: (a) Competitors have "some uncertainty. Consumers shop based on merits, sellers strive to succeed on the merits, costs decline, quality improves, breakthroughs happen.

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When regulators accept that argument, they misunderstand the term "compete." Effective competition means not merely "competing;" it means competing on the merits. Winning for reasons other than merit means displacing competitors with more merit.

That makes consumers worse off—an outcome precisely opposite to competition's purpose.

The second category concerns the , four in particular: its (a) in-house knowledge, financed by decades of captive ratepayer payments; (b) economies of scale, derived from monopoly service territory boundaries drawn by state law; (c) low-cost access to capital markets, attributable in part to the government’s continuing role of limiting competition and setting reasonable rates; and (d) surplus capacity (a utility must build capacity in "lumps," ahead of demand, to be ready always to meet that demand).

Those internal characteristics help the utility (or its affiliate) price below its competitors.

Market power and anticompetitive conduct: A market is not effectively competitive if any seller has "market power": the "ability profitably to maintain prices above competitive levels for a significant period of time."[2] Excessive price is not the only harm; market power can also cause reduced output, inefficient operations, declines in quality, and dulled incentives for innovation.

With market power, a seller can engage in anticompetitive conduct.Four major forms of anticompetitive conduct are: (a) (charging prices "below an appropriate measure of cost for the purpose of eliminating competitors in the short run and reducing competition in the long run").[3] How does anticompetitive conduct differ from aggressive, pro-competitive conduct?The answer is not that someone wins and someone loses; win-loss outcomes are inherent in any competition.It is impossible to have markets in which no company has an unearned advantage.But regulation can address the unearned advantages created by regulation. Competing with government-assisted advantage does not violate antitrust law.Advantages created by government can be removed by government.Only by doing so can we have real competition, effective competition, competition on the merits—competition whose purpose is to help the consumer, not entrench the incumbent. A disproportionate fraction of Canadian professional hockey players were born early in the year.) Extremely large capital requirements are necessary to enter the market. c) Supporting the physical distribution network of each company is an extensive infrastructure devoted to customer service and information management.The distribution networks for a company in the express mail industry require a heavily integrated and complex information system.Unearned advantage: In the context of utility regulation, unearned advantage is government-assisted advantage: the advantages accrued from decades of government protection from competition, plus decades of government price-setting calculated to produce reasonable returns. The utility's name recognition and its government imprimatur create brand loyalty.When the utility (or its affiliate or successor) enters a competition, these advantages act as entry barriers—differences in market entry cost between the incumbent and a new entrant. Brand loyalty combines with normal human inertia to increase the likelihood that a busy customer will choose the utility (or its affiliate) over a newcomer—unless the new entrant spends a lot of money to change the customer’s mind.

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