The concepts monopoly and aggression are intimately related, like lock and key, or mother and child. You cannot fully understand the first without understanding the second.
Most of us are taught to think of a monopoly as simply any lone seller of a good or service, but that definition is fraught with problems, as Murray Rothbard, Austrian economists generally, and others have long pointed out. It overlooks, for example, the factor of potential competition. If a lone seller knows that someone could challenge his “monopoly” by entering the market, that will tend to influence the seller’s pricing and service policies. Is he then really a monopolist even if, for the time being, he’s alone in the market?
In deciding who is a monopolist, we also face the problem of defining the relevant market. The Federal Trade Commission once charged the top few ready-to-eat breakfast cereal companies with monopolizing “the market.” But what market? The FTC meant the market for ready-to-eat breakfast cereals. But that’s not all that people eat or can eat for breakfast. If you define the relevant market to include bacon and eggs; oatmeal; yogurt; grapefruit; English muffins and butter; bagels, lox, and cream cheese; breakfast burritos; and anything else people may find appealing in the morning, a “monopoly” in ready-to-eat cereals looks rather different. Even a single cereal seller (assuming no government privilege) could not price his product without taking into account what his rivals in other foods, and consumers, were doing. He could not even be sure who his rivals were until they arose in response to his consumer-alienating actions.
The conventional notion of monopoly has also been subjected to the reductio ad absurdum. In deciding who is a monopolist, where do we stop? Only one shop can occupy the northeast corner of Elm and Main in Anytown. A particular consumer could decide it’s too costly in time or effort to cross the street and buy at the rival shop on the northwest corner. Does that make the first shop a monopoly?
Read the rest via Monopoly and Aggression – The Future of Freedom Foundation.