"Roy Schestowitz" <newsgroups@xxxxxxxxxxxxxxx> wrote in message
news:1361982.PW6aK3suG4@xxxxxxxxxxxxxxxxxx
__/ [ Scott W ] on Wednesday 26 July 2006 12:16 \__
Oliver Wong said:
"Roy Schestowitz" <newsgroups@xxxxxxxxxxxxxxx> wrote in message
news:1379294.AqC1YP3E1F@xxxxxxxxxxxxxxxxxx
Red Hat and SUSE solidify market positions
,----[ Quote ]
| ...Red Hat Inc.'s Enterprise Linux and Novell Inc.'s SUSE are poised
to
| leverage their strengths for greater market share while also warding
off
| new entrants into the enterprise Linux market.
`----
http://searchopensource.techtarget.com/originalContent/0,289142,sid39_gci1204177,00.html
Isn't this a bad thing? "leverage their strengths [...] while also
warding off new entrants into the enterprise Linux market" sounds like
monopoly abuse.
not if their strengths are a superior product and customer satisfaction.
As opposed to lockins (inability to trivially change suppilers once
dissatisfied) and acquisition of hardware from vendors, which is bought
with
a generous option of just one operating system.
Well, I don't know too much about business or economics, so I had to
look up the definition of monopoly:
http://en.wikipedia.org/wiki/Monopoly
<quote>
Efficiency monopoly
An efficiency monopoly exists when a firm is satisfying consumer demand so
well that profitable competition is extremely challenging. It is not the
result of government granted privilege, subsidies, regulations, etc. To
maintain its monopoly position it must make pricing and production decisions
knowing that if prices are too high or quality is too low that competition
may arise from another firm that can better serve the market. It is often
described as a situation where a firm is able to keep production and supply
costs lower than any other possible competitor so that it can charge a lower
price than others and still be profitable. Since potential competitors
cannot match the monopoly's efficiency, they are not able to charge a lower,
or comparable, price and still be profitable.
[...]
Monopoly and efficiency
In standard economic theory (see analysis above), a monopoly will sell a
lower quantity of goods at a higher price than firms would in a purely
competitive market. In this way the monopoly will secure monopoly profits by
appropriating some or all of the consumer surplus, as although the higher
price deters some consumers from purchasing, most are willing to pay the
higher price. Assuming that costs stay the same, this does not lead to an
outcome which is inefficient in the sense of Pareto efficiency; no-one could
be made better off by shifting resources without making someone else worse
off. However, total social welfare declines compared with perfect
competition, because some consumers must choose second-best products.
It is also often argued that monopolies tend to become less efficient and
innovative over time, becoming "complacent giants", because they don't have
to be efficient or innovative to compete in the marketplace. Sometimes this
very loss of efficiency can raise the potential value of a competitor enough
to overcome market entry barriers, or provide incentive for research and
investment into new alternatives. The theory of contestable markets argues
that in some circumstances (private) monopolies are forced to behave as if
there were competition, because of the risk of losing that monopoly to new
entrants. This is likely to happen where a market's barriers to entry are
low. It might also be because of the availability in the longer-term of
substitutes in other markets. For example, a canal monopoly in the late
eighteenth century United Kingdom was worth a lot more than in the late
nineteenth century, because of the introduction of railways as a substitute.
[...]
The American mathematician Harold Hotelling came up with Hotelling's law
which showed that there exist cases where monopoly has advantages for the
consumer. If there is a beach where customers are distributed evenly along
it, an entrepeneur setting up an ice cream stand would naturally place it in
the middle of the beach. A competing ice cream seller would do best to place
his competing ice cream stand next to it to gain half the market share, but
two stalls right next to each other is not an ideal situation for the people
on the beach. A monopolist who owns both stalls on the other hand, would
distribute his ice cream stalls some distance apart.
</quote>
So if Red Hat and Suse are so great that no one could possibly compete,
you've got an "Efficiency Monopoly" (or more accurately, a Cartel, since
there are two vendors here, rather than one). That being said, it sounds
like some of the problems associated with monopolies wouldn't apply. E.g.
you can often get OpenSource products for free (as in beer), and so the
"higher price" problem associated with monopolies might not occur. However,
I don't see any reason why the "complacent giant" problem might not occur.
But then later on in the Wikipedia article, it mentions that monopolies
are not nescessarily bad (for the consumer). Still trying to figure out if
this might be the case here. Perhaps with fewer vendors, you'd end up with
more homogeneity, and thus an easier learning curve?
- Oliver
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