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Comments:
<0> then gary makes no profit, so it was not particularly bright of gary to enter the hotdog market. he is out $2222222.
<0> farhan: fred would, since he wants to have his monopoly back.
<1> evilgeek : no one charges at ONLY their marginal cost (cost of each additional unit) they include the fixed costs (investment costs)
<1> evilgeek : yeah, but then gary would also, because he wants to survive the price war.
<2> But Fred has long since made his initial investment back.
<0> farhan: sure they do. it is actually quite common for companies to charge even less than their marginal costs.
<3> Why have a monopoly when all parties can just agree to a high fixed price? That's how it works, it's a monopoly in the end but doesn't "appear" like one
<1> evilgeek : you already proved my point, btw. That Fred would lower his costs, therefore NOT keep it at the monopoly price
<1> evilgeek : ohhh, no it isn't
<0> gary wouldn't, because then he'd be losing money. then he gets ruined by fred.
<0> farhan: no i haven't. my point is that gary would not enter the market in the first place.
<0> farhan: which is completely counter to your point.
<1> evilgeek : ah, i see, and let me tell you why you're wrong
<0> i'm not wrong. this happens.
<1> evilgeek : first off, if it costed $1 to produce a hotdog, they would price at $1(which is the price of each unit produced) + (investment costs)/(number of units produced)
<0> we've been over this. they wouldn't.
<1> evilgeek : lets ***ume that they sell infinite hotdogs, so it would be $1.000000000001
<0> at least, fred wouldn't. and once fred doesn't, gary can't sell hotdogs.
<0> let's not ***ume that they sell infinitely many hotdogs. we want this to make mathematical sense.
<3> I really like your over-simplification of free market economies :)
<1> evilgeek : okay, then 100 hotdogs. does that make sense?
<0> Maloeran: my point is that farhan is wrong even in this oversimplification.
<3> Yes, definitely wrong...
<0> farhan: it will not make sense regarless of how many hotdogs are sold.
<1> evilgeek : does that make sense? 100 hotdogs?
<1> let me explain how it would :-)
<2> Just explain, don't say you're going to explain. -_-
<0> once fred sets his prices to $1 or less, gary either follows suit, leaves the market, or gets ruined.
<1> it costs $1 to produce a hotdog, and 2222 in investment/startup costs
<3> Or keep on explaining that you are going to explain what you will explain
<1> evilgeek : therefore, he would charge $1 + $22
<1> 23 for a hotdog
<1> they have to cover their fixed costs also
<1> otherwise, they BOTH would go out of business
<0> dude, no. once fred ruins gary, he can charge an arbitrary amount for his hotdogs.
<2> But wait
<1> evilgeek : how would he ruin him?
<0> fred would not go out of business. he would lose an equal amount of capital to gary.
<0> fred has more money.
<2> This is a monopoly, Fred has looong since re-earned his initial investment.
<4> HMM
<1> Sartak : companies have initial amounts in many forms
<4> woops
<4> capslock
<5> that supply and demand rubish has limits at both ends. at one end the custommers decide it's no longer worth bying at the other the producer decides it's not worth producing
<0> once fred sets his price to $1 or less, either gary follows suit, in which case a pricewar ensues, gary loses the rest of his money, and fred is out an amount equal to gary's capital, or gary does not follow suit, in which case he effectively leaves the market.
<2> Also Fred can continue selling hot dogs on the other side of the state for $100 until he drives Gary to the unemployment office.
<4> farhan's solution will be something like "more competition would enter the market besides simply gary"
<4> "so the market would work itself out" ad nauseum
<5> very well financed competition
<0> niv_: but they won't, because of the barrier to entry.
<3> Selling price is barely a factor these days
<4> i know
<0> niv_: the large barrier to entry is key in this example.
<5> the kind that won't really compete
<5> we have a lot of that in australia
<3> You can sell ineffective products for large amounts when there are free and better alternatives, and still make people buy through marketing and various market forces
<1> if it costs $1000 to get into the business, and $10 to produce each additional unit, and 50 units of hotdogs are sold, he would charge $10 + 1000/50 = $30. Both would charge $30. If anyone charged less than $30, they would be the first to go out of buisness, because all of the consumers would rush to that guy selling at $29, and fred (or gary, whoever charges at $29) would be losing money on each sale and eventually go out of business
<0> Maloeran: advertising is useful for that, isn't it?
<5> keep them in the dark and feed them bull****
<0> farhan: gary might, but fred would not.
<3> Sure evilgeek, how wonderful
<1> why does it make a difference?
<0> farhan: remember that fred wants to push gary out of the hotdog industry.
<1> evilgeek : they both wish to push both out
<0> farhan: once fred does this, he has a monopoly again.
<1> evilgeek : HOW is he going to push him out of business?
<1> explain to me the mechanics of that
<0> yes. the difference is that gary will fail while fred will succeed.
<1> why?
<0> farhan: fred has 10 times as much capital as gary. thus, he can sustain a price war longer than gary.
<1> evilgeek : so, the one who has less capital will temporarily shutdown and not sell any hotdogs
<2> Not to mention Fred already has brand loyalty and all that.
<0> farhan: you are working under the communist ***umption that fred and gary have the same amount of money.
<3> You are talking about an economy of two smiths selling copper forks in an ancient era village. Free market today has different dynamics
<1> evilgeek : while the other one loses TONS of money :-)
<1> evilgeek : no, im pretty free-market ;-)
<5> temporarily :) no much more likely to be permanent
<0> farhan: sure. and he's still incurring the costs of maintaining his hotdog factories.
<3> We already got that, farhan
<0> farhan: then the other one would have raised his prices by epsilon.
<5> if you ran a business think what would happen if you temporarily shut it down
<1> evilgeek : okay, lets say they ahve different amounts of money. Even then. Lets say Gary has $999999999999999999 and fred has only $20 left over. Gary will shutdown his business until Fred gives it up. That way, gary won't lose any money
<1> evilgeek : btw, some copanies did do that during the price wars between standard oil and the otheres
<5> you have that backwards
<3> This is so wrong...
<2> We should use more meaningul names. Matt for Monopolist and Ned for the New Guy.
<1> standard oil would lower their prices (whichbtw, is good for the consumer) and the smaller companies would shutdown for a month or two
<5> monopolies are never good for the custommer
<0> farhan: yeah. look what happened with the other companies.
<5> never will be
<1> evilgeek : they won :-)
<0> they got absorbed by standard oil, a monopoly that lasted until the government broke it up.
<2> By shutting down they win? What the hell?
<1> evilgeek : standard oil was losing TONS of money
<0> farhan: yes, but they could handle that because of the capital they had am***ed.
<1> evilgeek : that's facually incorrect. Standard oil was broken apart much later after they had like %50 of the market share
<0> farhan: the smaller companies could not. as a result, they capitulated, one by one.
<1> evilgeek : no, they would shutdown
<1> evilgeek : what do you fail to understand about the concept of shutting down?
<1> evilgeek : when you stop selling, so you stop losing money
<0> you don't, since you have to maintain your factory.
<3> Free market is all about maximizing profits, no matter if you make the country's economy collapse to obtain more of this divine benediction from our beloved god Money
<2> I'm starting to think farhan is just a troll.
<0> otherwise, a barrier to reentry crops up.
<4> sartak; heh
<3> Sure sounds like it, Sartak, but I think he might be fairly young and idealistic... in the wrong way
<1> evilgeek : if the other guy is selling below cost, shutdown and wait til he gets tired of hit. Hell, buy his products and sell them for higher when he stops selling for below cost prices :-)
<1> that'd what i'd do
<0> i just think he's studied too little game theory.
<2> farhan: While the new company is shut down, why doesn't the monopoly jack its prices back up again?
<0> farhan: what sartak just said.
<4> i just think he's been seduced by capitalism
<1> the moment it does, the small company starts up oeprations again :-)
<1> losing no money
<3> Ah this is so stupid. I'm out of here. farhan, you need to read some books about how the universe works on the scale of human societies
<0> farhan: and then the monopolist drops its prices to below cost.
<1> while the larger company lost a LOT selling for below cost
<0> they didn't lose anything, since they were never selling below cost.
<1> evilgeek : and the smaller shuts down again :-) It can play this came forever until the big company loses all of its reserves and CANNOT do it anymore
<0> how does the big company lose any reserves in this little stochastic process?
<4> "Look! I already told you! I deal with the god damn customers so the engineers don't have to! I have people skills!" god office space is a funny movie
<1> selling below cost
<0> but they weren't, since the small company never shut down.
<1> evilgeek : if it costs the big company $100 to produce something, and it sells for $1, its losing $99 per transaction
<0> (since they never sold for a profit, either.)
<2> niv_: That's my favorite line in the whole movie. :D
<1> evilgeek : btw, when i say "shutdown" i mean temorarily goes out of business for a month or a week
<0> yes, but it's not losing anything if it makes no transactions.
<2> "What the hell is wrong with you people?!"
<0> are you ****ing daft?
<4> sartak hahaha ya
<1> evilgeek : makes no transactions?
<1> evilgeek : huh?
<1> that makes no sense
<0> you make no sense.
<1> you need to study economoics :-)
<0> you should read and think, rather than rambling.
<1> this is what we're training to do
<1> argue against people who wish to regulate the economy
<0> you are ***uming that the big company can't change its prices while the small company can.
<0> this is inconsistent.
<1> evilgeek : both can
<0> train harder.
<3> You argue very poorly, farhan, it's not even coherent
<1> Maloeran : nope :-)
<1> Maloeran : how have i been wrong?
<0> then why do you insist that the big company loses money by selling below cost when it makes no transactions below cost?
<6> farhan: shutting down for a month or two is rather costly. you still have to pay for lot, rehiring/training employees, paying for living necessities while you're out of business, etc
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