Originally posted by: dmens
Originally posted by: CTho9305
If large companies could push smaller companies out of the market on a whim, why would anyone invest in smaller companies? Abu Dhabi would be better off buying a large company (e.g. Walmart), squashing its competitors, and then using that money to buy a large company in the next market they want to dominate. We'd be in a straightforward "he who has the gold rules" situation.
In each market they seek to dominate they have to spend a lot of money for an uncertain return, then face the prospect of increased long-term competition if they tried to raise prices.
Besides, would it be fair to deny people with gold the right to invest as they wish? Property rights should be equally applied to all people.
To ensure that all people have the opportunity to exercise rights, you need to apply some limits.
No, people don't need to be buying many processors for the monopolist to maintain control. The monopolist only needs to keep the market big enough that a startup can't suddenly grab a large chunk of it (to keep the barrier to entry high). Additionally, if the large company can do something like add new instructions every 10 years and ensure software uses them, they can use patents to prevent anyone from producing alternatives compatible with existing software (further raising the barrier to entry).
Good point regarding patents, the current system makes a mockery of individual property rights. It is a problem that needs to be addressed.
How can the monopolist keep the market large and keep prices outrageously high at the same time? Those are opposing forces. A high market price lowers the relative entry barrier startup cost.
You don't need to charge $5000 for the CPU for it to be "outrageous". Hell, compared to what we have today, you could keep prices the same but just stop innovating (and maintain your market with (potentially artificially-accelerated) product wear-out). Consumers effectively get screwed not directly because they pay too much, but because they get less than they would in a competitive market (i.e. 5 years from now still being stuck with 3GHz i7 instead of 5GHz iWhatever). If all the DRAM manufacturers got together and agreed to cease R&D, I'd think that's just as evil as when they got together to fix prices.
As for corporations gobbling each other up... car companies? Microprocessor vendors? Graphics card companies? Electric guitar makers? Cell phone companies? Camera makers? Maybe they'll eventually fail, but it sure takes a long time and there's no guarantee that the resulting supply hole won't be filled by a large player from another market. When you have an oligopoly and one company fails, the rest pick up the demand (e.g. CompUSA dies, and Best Buy gets most of the business... AMC fails and Chrysler buys the remains).
Heh and look what is happening to Chrysler now, an unlawful, unconstitutional bankruptcy orchestrated by the government to pay a political debt.
Chrysler isn't doing so well, but in 2 years will you buy a car from SomeGuyInAGarage, or will you just have to buy a Honda instead? Again, the barrier to entry is high enough that you don't see many new players in the market.
Anyways, all those failing companies will be replaced by better and more efficient ones producing better products. If the failing company really have a sound product and they are failing because they are being crushed by a dominant firm, then they can find investors to support them. Isn't that what AMD is doing?
I asked this before, if it's truly being crushed by a dominant firm, why would anyone invest? If they invest so much that the smaller company becomes the dominant firm, we have exactly the same situation in reverse. You could have escalating investments, but at some point all of the money is tied up and one side loses simply because it's smaller.
I think the idea is that the next time AMD kicks Intel's butt (Opteron vs. P4), OEMs will be free to buy the better processors without fear of retribution because someone will have an eye on Intel and Intel will be scared of a large fine, and consumers will get faster chips for more $$$ or as-fast chips for less $$$. Ordinary consumers won't be stuck buying tomorrow's P4 because all the available machines from HP/Dell/Sony won't be Intel-only.
The manufacturers bought whatever would have made them more money. In the Opteron vs P4 case, consumers got slower chips for a less money
because P4 was cheap to make. They could have bought a faster chip for more money, because K8 was on the market the entire time.
In the mainstream segment, price is the major concern, and the K8 was never competitively priced until the release of C2D (in my opinion). If AMD wanted K8 to compete in that segment, they should have priced appropriately. Then the OEM's would have used them. Look at happened after the C2D release. With the price cuts, AMD laptops/desktops showed up all over Best Buy.
I don't think you're understanding the rebate example. In the rebate examples, Intel can sell P4s for $100, with the rebate incentive so they're $90 for Intel-exclusive customers. Even if AMD is willing to sell faster chips for $45 (i.e.
half as much), HP/Dell/Sony would be foolish to buy any of them. If Intel made the rebate lower the price to $85, AMD would literally have to
pay OEMs to take their CPUs.
Since you're asking about a real-world example, a lot of idealities can be thrown out and you have to consider that most of the market is OEM machines, not Newegg. Maybe enthusiasts could go buy fast $45 K8s instead of $85 slow P4s, but the vast majority of the market has enough of a life to not be fully informed about computers. They reasonably expect that free-market capitalism means that
in general, the company they're buying from would choose the better CPU (using whatever metric) because any company stupid enough to willingly choose $85 slow P4s over $45 fast K8s would be killed by competitors. When you have anticompetitive monopolies thrown in the mix, those assumptions become invalid and everyone gets screwed.