Monopoly Capitalism and Contestability

[bailey_187]

Ok, many of us accept that developed capitalist economies are made up monopolies or oligopolies, and we use this as an argument against capitalism that it is no longer made up of small competing firms so all the perceived benefits of markets no longer apply, rather we are demonated by a few small firms.
However, what do you (if you agree generally with what is said above) think of the theory of Contestable markets - that the monopolies today will behave competitivly out of fear of a new firm entering the market? Any rebuttels to that?

[mel]

Ok, many of us accept that developed capitalist economies are made up monopolies or oligopolies, and we use this as an argument against capitalism that it is no longer made up of small competing firms so all the perceived benefits of markets no longer apply, rather we are demonated by a few small firms.
However, what do you (if you agree generally with what is said above) think of the theory of Contestable markets - that the monopolies today will behave competitivly out of fear of a new firm entering the market? Any rebuttels to that?

Without restrictions, monopolies can keep a new firm from entering the market through price fixing, bullying, buying up their "intellectual property", or threatening them with your already accumulated intellectual property.

Even if it weren't the case that a firm could essentially keep themselves as the only competitor indefinitely, there is no reason for a firm today in a monopoly position to act competitively because in 6 months they may have competition. Until the threat of competition is actually extant, there is no incentive to behave as if the threat is now extant because the attention spans of customers are short. The monopoly knows as well as anybody else that once they hear of a new firm starting up, once that threat is extant they can begin "playing nice", lowering prices, etc. in order to retain their current customers. They don't need to start this when the threat is still imaginary, but only after it's been made concrete.