Monopoly

TL;DR: You cannot express the idea of monopoly without expressing the idea of volatile market dynamics over time due to competition. Once you have the language to explain competition and time, you can understand that some agents will seek to rig the game so these changes become less erratic and even favorable at the expense of better GDP and productivity.

In the ideal version of Laissez-Faire capitalism, consumers are well educated and have perfect information about the products they choose. Likewise, Manufacturers provide perfect information about their products so consumers can make the best choice. Picture Amazon but where nobody lies about their products or reviews and the search bar can read the consumers mind and give them exactly what they want. In this system, consumers would:

1. •realize they have a need
2. •go to Amazon to search
3. •always buy the first item in the search results because it would provide them the most utility

Assume we have this system. There still exists a problem on both the supply and demand side. Over time as markets mature, producers of a good might seek to vertically integrate their supply chain. Lets take a tire company for example. John's Tire Co. has been manufacturing Tires since 1928. Tires are a highly competitive market with lots of other companies making similar goods so they make a small profit margin ~ 10%, but sell high volume because John Tire Jr. is ambitious and has expanded his father's company across the entire U.S. John Tire Jr. gets a genius idea. He plans to buy a local rubber plant and convert them to only manufacture tire grade rubber. He also plans to buy an oil post processing plant and convert it to only manufacture oil by-products that can be converted into grade A tire rubber. After only a year, John's Tire has a duopoly with only one other tire manufacture that has also vertically integrated. Together they make the best tires in the world for the cheapest prices and the world is great!

The market becomes quite monolithic and variety of choice is slim. Tire startups have tried to make advanced compounds or try new manufacturing techniques that greatly improve quality or reduce manufacturing cost, but they still can't compete with John Tire Jr. because the power of vertical integration and economy of scale is too large to overcome. So eventually most small tire companies die out because they can't escape the voracious competition of John Tire Jr. and Jane Michelin. When consumers go to the perfect Amazon search from before their options are significantly reduced. They only see 2 tires! Even though some consumers would prefer to pay more for better quality or different compounds there are only 2 options so they pick the one that is "close enough" to their needs but are still kind of unsatisfied.

After 10 years, the investors and John Tire Jr. are no longer happy with the profits they are making and whats more inflation has reduced the profit they are making significantly. John Tire Jr. is not one to sit around and wait for things to get better on his own! Because he owns the tire plant and rubber plant he tells them to start mixing in cheaper plastics to reduce costs. The life of the tires is reduced by 28% but most consumers won't notice and they continue to enjoy the same price they did as 10 years ago. All is well with the world and consumers have just accepted the new normal while saying "Man I wish these tires were made in the USA" and "They just don't make em like they used too. $100 used to get you a real premium tire."

Do you see the problem? There is a world where Sally Continental or Tim Goodyear got their tire startup off the ground and scaled just like John Tire Jr. and now are able to offer the same lower price after 10 years without sacrificing quality because of their advances in technology.

This is an objectively worse outcome because GDP was sacrificed so John Tire Jr. could rest on his laurels. If Sally Continental was allowed to overtake John Tire Jr., the world would be more productive because Sally was able to reduce the manufacturing cost through innovation so the price could stay the same.