1. Creating value
A business creates X dollars of value and capture Y% of X. (both x and y are independent) To capture value you need to capture X and Y both
2. Perfect competition
Pros
- easy to model
- efficient in a static world
- politically stable
Cons
- psychologically unhealthy
- irrelevant in a dynamic world
- preempts question of value
3. Monopoly
Pros
- incentive to innovate
- stable, long term planning
- deeper project financing
- symptomatic of creation ⇐→ Cons
- lower output, higher prices
- price discrimination
- stifle innovation
4. Lies of people
People in monopoly pretend not to (so that they dont get regulated by the government) We are in a huge market
People in perfect competition pretend they are doing something unique. Make yourself look less competitive We are in a narrow market
5. How to establish a monopoly
Start small and monopolize (easier to dominate a smaller market than a large one)
6. Last mover advantage
proprietary technology network effects economies of scale branding