*** The Official CUCKposting thread ***

[OngBonga]

What economists call natural monopoly derives from two elements: (1) fixed costs, and (2) economies of scale.

Ok so I took the time to read this post and try to absorb it. The first point is very easy to understand. I was kind of hitting on this point without realising by referring to the infrastructure necessary to deliver an essential service.

The second point, I kind of get this. The more efficient a business is running, the easier it will be for it to outcompete its rivals.

Regulation also plays a part. The more regulated an industry, the less incentive there is to enter the market in the first place. The established and wealthier companies are better able to absorb the costs associated with regulations.

So ok I can see the point that nearly everything is monopolistic.

But soda isn't an essential service, and niether is Walmart or Amazon. If a company gains a monopoly in a genuinely competetive environment, then that's testament to their success. That's not really what my problem is. My problem is where companies are able to make profit off essential services where they have not earned that monopoly by outcompeting their rivals. They have bought that monopoly with money and influence; they won a government contract. That isn't free market capitalism, that's oligarchy.

[wufwugy]

My problem is where companies are able to make profit off essential services where they have not earned that monopoly by outcompeting their rivals. They have bought that monopoly with money and influence; they won a government contract. That isn't free market capitalism, that's oligarchy.

Do you dislike the profit part of it altogether, or are you thinking in terms of the firm using its market power to set the price higher and quantity produced lower than the market demand wants?

What is essential?

[OngBonga]

Do you dislike the profit part of it altogether, or are you thinking in terms of the firm using its market power to set the price higher and quantity produced lower than the market demand wants?

I think it's a simple as that money that is paid in dividens, that profit, would be better spent on investment, whether that be R&D or lower prices. I fail to see how these companies have earned the profit. Just by taking risk? What risk? Their profit is guaranteed. The only risk they're taking relates to their competence, and even that isn't a deal breaker.

[spoonitnow]

I think it's a simple as that money that is paid in dividens, that profit, would be better spent on investment, whether that be R&D or lower prices. I fail to see how these companies have earned the profit. Just by taking risk? What risk? Their profit is guaranteed. The only risk they're taking relates to their competence, and even that isn't a deal breaker.

The bold is mistaken.

The underline is just, like, your opinion man. Additionally, they've earned the profit by taking on the risk. That's how an investment works.

[OngBonga]

The bold is mistaken.

Well if their profit is as hard earned as your regular man's business, I might soften my tone somewhat. But I fail to see how it isn't guaranteed, or at least close to. Ok a nuclear meltdown or an oil slick is going to eat into their profits somewhat, but they lack the competition to pay the ultimate price for their failure. See BP for example.

[spoonitnow]

Well if their profit is as hard earned as your regular man's business, I might soften my tone somewhat. But I fail to see how it isn't guaranteed, or at least close to. Ok a nuclear meltdown or an oil slick is going to eat into their profits somewhat, but they lack the competition to pay the ultimate price for their failure. See BP for example.

The higher the risk of investment, the higher the dividends if you want to keep investors on. It's that simple.

This has nothing to do with profit being "hard earned" or a "regular man's business." It's the same principle for all businesses and investments.

Simple example: It's the same reason why loans have interest, and the higher the risk on the loan, the higher the interest.

[OngBonga]

The higher the risk of investment,

But how risky is their investment? If they're buying a government contract and will have no serious competition, the risk is very low indeed.

[wufwugy]

See BP for example.

What do you think about BP?

[BananaStand]

I think it's a simple as that money that is paid in dividens, that profit, would be better spent on investment, whether that be R&D or lower prices.

If that's the case, why would the shareholders of these companies invest at all? Who would invest in a train with a 0% return when they could invest in....literally anything else....even treasury-bonds.....and earn a profit?

I fail to see how these companies have earned the profit.

They've successfully provided a service that people want at a price people are willing to pay.

Just by taking risk? What risk? Their profit is guaranteed.

False. Literally not even close.

The only risk they're taking relates to their competence, and even that isn't a deal breaker

Really? C'mon man...think!

What if a drunk driver blows through a railroad crossing and T-bone's a train? Or, if we're talking about the electric company, what if that drunk driver takes down some utility poles?

What if hackers breach the system and fuck with the electrical grid?

What if there is an ice storm and trees fall on the power lines, or across the railroad tracks?

What if there is a solar flare that shorts out significant portions of the infrastructure?

I could keep going...