I suspect we’re speaking at cross-purposes and doing different ‘econ 101’ analyses. If the EA world were one of perfect competition (lots of buyers and sellers, competition of products, ease of entry and exit, buyers have full information, equal market share) I’d be inclined to agree with you. In that case, I would effectively be arguing for less competitive organisations to get subsidies.
That is not, however, the world I observe. Suppose I describe a market along the following lines. One or two firms consume over 90% of the goods whilst also being sellers of goods. There are only a handful of other sellers. The existing firms coordinate their activities with each other, including the sellers mostly agreeing not to directly compete over products. Access to the market and to information about the available goods is controlled by the existing players. Some participants fear (rightly or wrongly) that criticising the existing players or the structure of the market will result in them being blacklisted.
Does such a market seem problematically uncompetitive? Would we expect there to be non-trivial barriers to entry for new firms seeking to compete on particular goods? Does this description bear any similarity to the EA world? Unfortunately, I fear the answer to all three of the questions is yes.
So, to draw it back to the original point, for the market incumbents to offer very high salaries to staff is one way in which such firms might use their market power to ‘price out’ the competition. Of course, if one happened to think that it would bad, all things considered, for that competition to succeed, then of course one might not mind this state of affairs.
[also speaking in a personal capacity, etc.]
Hello Greg.
I suspect we’re speaking at cross-purposes and doing different ‘econ 101’ analyses. If the EA world were one of perfect competition (lots of buyers and sellers, competition of products, ease of entry and exit, buyers have full information, equal market share) I’d be inclined to agree with you. In that case, I would effectively be arguing for less competitive organisations to get subsidies.
That is not, however, the world I observe. Suppose I describe a market along the following lines. One or two firms consume over 90% of the goods whilst also being sellers of goods. There are only a handful of other sellers. The existing firms coordinate their activities with each other, including the sellers mostly agreeing not to directly compete over products. Access to the market and to information about the available goods is controlled by the existing players. Some participants fear (rightly or wrongly) that criticising the existing players or the structure of the market will result in them being blacklisted.
Does such a market seem problematically uncompetitive? Would we expect there to be non-trivial barriers to entry for new firms seeking to compete on particular goods? Does this description bear any similarity to the EA world? Unfortunately, I fear the answer to all three of the questions is yes.
So, to draw it back to the original point, for the market incumbents to offer very high salaries to staff is one way in which such firms might use their market power to ‘price out’ the competition. Of course, if one happened to think that it would bad, all things considered, for that competition to succeed, then of course one might not mind this state of affairs.