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RE: Some thoughts on natural monopolies

in #monopoly7 years ago

When it comes to toothpaste and other household items, there can be some dirty play, particularly if the distributor has strong hands and the shop has weak hands. If a significant amount of customers will use Pepsodent and only Pepsodent, because they think it's simply the best toothpaste, and if no other competitor is nearly as popular as Pepsodent, then it's easy for Pepsodent to give the shop a deal like ... "we'll allow you to sell pepsodent and give you a good discount if you sell our toothpaste and no other toothpaste". If the shop will reject the first offer, the second offer may be ... "we'll allow you to sell pepsodent but without any discount if you arrange the shelves so Pepsodent will be the dominating toothpaste".

Toothpaste is typically a quite insignificant cost in a family budget, hence there is no strong price pressure on it. If the customer believes Pepsodent is better than some other brand, he would typically choose Pepsodent even if the other brand was for free. Anyway, there exists plenty of competition, there are other international brands like Colgate and Aquafresh ... and even more - most markets also have domestic brands (in Norway we have Solidox, in Russia they have quite many domestic brands, etc.