monopoly, negative feedback

Anton Sherwood (
Wed, 24 Sep 1997 21:40:48 -0700 (PDT)

Joao Pedro writes
> ... I still think monopolies happen in a free-market

How? Please give some examples.

> and I still can't understand why would negative feedback
> prevent this and the exploration of the population by any corp.

Suppose you are a monopolist: the only producer of shoes.
There's no point in having a monopoly unless you charge
higher prices than you could get in a competitive market;
so you raise the price of your shoes. But at the higher
price, some entrepreneurs think: Hey, I couldn't make money
selling shoes at the old price, but now I can. So more
producers enter the market. The monopolist's own action
has indirectly made the market competitive, and the price
drops again.

The price system in general illustrates negative feedback:
scarcity -> price rises -> supply expands -> price falls.

Anton Sherwood *\\* +1 415 267 0685 *\\*