The hijacked Odyssey Market

[Rev. Rob]

For the past year or so, it's been pretty well known among collectors that just one person has been artificially inflating the prices of Magnavox Odyssey items by %100 to %1000. He's been buying up all of the auctions at fair market values and then massively marking them up. Even the prices in off-eBay transactions have been going up as a result.

 

The two known eBay accounts that he uses are:

http://myworld.ebay.com/sams_super_systems/

http://myworld.ebay.com/robotkingnes/

 

I decided to send him an email to ask whether he knows that he's a crook. Here's the conversation that ensued. And no, I didn't edit his spelling or grammar to make him look stupid.

 

Rev. Rob:

You should read this: http://www.pong-story.com/odyssey.htm

 

Dick:

 

thanks, I know it very well, what is your problem? So what is eating you? Did I buy something you wanted? Look at completed auctions, you will see I have sold a set for 1000, David Winter does not even mention store sales. Yes He knows me well. His blog is a buyers guide, I will pay his prices all day long. Most units I buy do not work, I have tohave them repaired. NO OTHER SELLER SHOWS THEM WORKING.

 

Rev. Rob:

 

The particular problem is that the prices you charge in your eBay store are reprehensible. You know that, because you paid significantly less for the items that what you're selling them for.

 

$4000 for the 1973 game pack? It's worth more like $200.

$600 to $900 for Odyssey sets? They're worth more like $200 to $300.$300 for the lightgun? It's

worth closer to $100. $500 for the 1972 game pack? It's worth more like $75.

 

I know, because those are the prices that I paid for complete and working items, mostly right here on eBay. It's not just your Odyssey prices that are outrageous either, I look through your store. Common items like a 7800, Pong systems, and ROB the Robot are marked up 300 to 500 percent more than the market value. $125 for a complete N64? I mean, really?

 

No, you didn't buy anything I wanted. While twenty dollars for an Odyssey power supply was

reasonable, the vast majority of your items are so overpriced it would make Dick Fuld grin.

 

Dick:

 

Who is Dick Fuld? I am selling off the wall. I guess not everyone reads the Forums. I am sorry if you and David do not agree with my prices, but at least my buyers get a working system, unlike all the ones sold on ebay for the prices you quote. And yes, all my Robs work.

 

I guess you missed the point of it all. I am not trying to sell these high priced items, they are there just to attract viewers to look at them. If someone really wants them, I will listen to offers, like the set I just sold for 1000. So who is to say what they are worth. They are worth what ever people will pay for them.

 

Rev. Rob:

 

The market is to say what they're worth, like if someone were to invent a website where an auction can be held, then whatever the item sells for would be the market value. That's a pretty good idea, I home someone does that one day.

 

I don't know if you know this or not, but because of you gamers/collectors don't buy or sell Odyssey games on eBay any longer. It's all gone to web forums, personal sites, and conventions. Ever heard of self-cannibalism? It's relevant.

 

Dick:

 

SO, some people flip houses, cars, what ever. I have chosen to buy and sell video games systems and have been doing it for over 30 years. I am almost 70 years old and started collecting at age 9, by buying stamps and coins. I made great money on coins and old cameras from 1970. Even wrote books and started a collector club, over 5000 members worldwide. So why are you so upset that I have been buying and selling these. 9 out of 10 DO NOT WORK and I spend money having them rebuilt. No one has ever gotten a broken system from me. My feedback speaks for itself. If people are willing to pay 5-600 for a complete system, I am ready to sell it. I have sold over 30 so far, most over 300. I am not screwing anyone. With me they see exactly what they are getting, unlike the broken, incomplete systems offered on ebay auctions. As for selling on auction, they suck.

 

Ther has always been a wide devide between Sellers and Collectors of anything. Collectors want to buy it cheap as posible. Also most sellers on ebay do not ship foreign, most of my big money comes from overseas.

 

Rev. Rob:

 

No, I just think that "people" want to buy things at fair prices. Auctions don't "suck," in fact, auctions are the international standard for setting the value of rare object. Further, your analogy of people who flip houses is a serious fallacy of logic. Investors buy houses low and then sell them at market prices. You by them at market prices and mark them up 300 to 400 percent.

If an investor tried to do that with a home, they would never sell any. As word continues to get out about you and your ethically grey practices, I doubt your sales will be all that good either.

You've really become quite notorious.

 

Dick:

 

So who are you? your image shows GOD and u call yourself a rev., are you god or a preacher????????? Not very God like. You buy action figures and sell nothing, so I guess you are a 30 something kid just trying to cause pain.

 

I do my best to be a good seller, the fact that I take the time to know what I am selling, lets me charge more and get it. I have always sold my items at higher prices because I find people will pay much higher prices for items that are working and from someone who knows what they are selling.

I have something that no one else ever had, 2 stores that offer complete working systems from PONG to Play station, all working. No one has even come close to my inventory and I guess that is frustrating to some collectors.

 

I have had a lot of people saying they will pay more for an item if it is in better condition. And I offer all different conditions.

 

As for the sites that are bad-talking me, I can not find any, but I have heard of them for ages. I know David has taken lots of space on all his sites to slam me, he is no longer posting warning to Magnavox buyers telling them what year the system was actually made, because I have been doing that for him and I have bought all that have come up for sale. I even bought all the inventory of the Atari.com web site, with 2 cib systems, rifle, cib, case, and 30 of the rare extra games, most cib.

 

So, I am sorry you have a problem with me, but I get lots of others who write just to tell me how wonderful it is to find a sellers who has such great inventory and knows what he is selling. These letters out weight the 1 or 2 like you.

 

Go in peace and the love of God,

Dick Sanford

 

Rev. Rob:

 

Has anyone ever told you that your name suits you?

 

I am pretty sure you're delusional. Do you think it's possible that you're speaking to the Lord? And what does my being a reverend or buying action figures for my children have to do with your immoral monopolistic behavior? Greed is a sin, and the Lord hateth a him that soweth discord amung men, a lying tongue, and he who devises wicket plots. Using His name for slander is also a no-no. You can allow your soul to fall into ruins, but I thought you should know that you have some work to do, especially for a man of year years.

 

I would love to see some letters, not reps, but actual letters, of people saying how wonderful

your prices are.

 

Your wide-ranging "inventory" is a moot point. This is eBay. Aside from Odyssey items, everything you sell is offered by another seller for 200% less, and in equal or better condition.

 

There is no justification for greed, Dick, not in the eyes of men, not in the eyes of God.

 

Furthermore, I do see Winters' warning about prices like yours on his website? http://www.pong-

story.com/odyssey_sales_warnings.htm

 

The question is, why do you lie when the lie is easily shown to be invalid? Obviously, the prices that you charge are well above the market value. These are the prices that you purchased your consoles at, by the motivation of greed, you mark them up and artificially inflate the value.

 

If you were a fair merchant, you could sell your items at auction or at market values. However, you're not. Greed has won you over. You're the same as the money changers at the Temple in Jerusalem.

 

Finally, you're not sorry that I "have a problem with you." You are the unrepentant servant of greed and money. Your morality means nothing to you. I am sorry for you, for the kind of person that you are.

 

Obviously you feel that your immorality is justified.

 

Dick:

 

well I guess we will not agree on this issue, and that is fine. The ones I buy at fair value are not complete, and 9 out of 10 do not work at all. So people who buy them on line are getting shafted, where as people who buy them from me are getting fully working and complete systems. My repair man gets 100 dollars per hour and has to spend hours fixing most of the systems. So my buyers are getting great value for their money. Greed is not my intention, but selling something complete and working, that they, and I can be proud of.

 

Rev. Rob:

 

I wasn't comparing your prices to prices of broken console, I was comparing your prices to those of complete, working sets. Thanks for the interview, though.

 

 

-------------

 

He didn't ever provide any of the fan letters that he bragged about having. Nor did he provide any documentation about the costs of his so-called repairs.

 

It's a real shame that one greedy scammer can ruin an entire retro market.

[Tempest]

Wow. You have too much time on your hands.

 

Tempest

[ericwierson]

For the past year or so, it's been pretty well known among collectors that just one person has been artificially inflating the prices of Magnavox Odyssey items by %100 to %1000. He's been buying up all of the auctions at fair market values and then massively marking them up. Even the prices in off-eBay transactions have been going up as a result.

 

The two known eBay accounts that he uses are:

http://myworld.ebay.com/sams_super_systems/

http://myworld.ebay.com/robotkingnes/

 

I decided to send him an email to ask whether he knows that he's a crook. Here's the conversation that ensued. And no, I didn't edit his spelling or grammar to make him look stupid.

 

Rev. Rob:

You should read this: http://www.pong-story.com/odyssey.htm

 

Dick:

 

thanks, I know it very well, what is your problem? So what is eating you? Did I buy something you wanted? Look at completed auctions, you will see I have sold a set for 1000, David Winter does not even mention store sales. Yes He knows me well. His blog is a buyers guide, I will pay his prices all day long. Most units I buy do not work, I have tohave them repaired. NO OTHER SELLER SHOWS THEM WORKING.

 

Rev. Rob:

 

The particular problem is that the prices you charge in your eBay store are reprehensible. You know that, because you paid significantly less for the items that what you're selling them for.

 

$4000 for the 1973 game pack? It's worth more like $200.

$600 to $900 for Odyssey sets? They're worth more like $200 to $300.$300 for the lightgun? It's

worth closer to $100. $500 for the 1972 game pack? It's worth more like $75.

 

I know, because those are the prices that I paid for complete and working items, mostly right here on eBay. It's not just your Odyssey prices that are outrageous either, I look through your store. Common items like a 7800, Pong systems, and ROB the Robot are marked up 300 to 500 percent more than the market value. $125 for a complete N64? I mean, really?

 

No, you didn't buy anything I wanted. While twenty dollars for an Odyssey power supply was

reasonable, the vast majority of your items are so overpriced it would make Dick Fuld grin.

 

Dick:

 

Who is Dick Fuld? I am selling off the wall. I guess not everyone reads the Forums. I am sorry if you and David do not agree with my prices, but at least my buyers get a working system, unlike all the ones sold on ebay for the prices you quote. And yes, all my Robs work.

 

I guess you missed the point of it all. I am not trying to sell these high priced items, they are there just to attract viewers to look at them. If someone really wants them, I will listen to offers, like the set I just sold for 1000. So who is to say what they are worth. They are worth what ever people will pay for them.

 

Rev. Rob:

 

The market is to say what they're worth, like if someone were to invent a website where an auction can be held, then whatever the item sells for would be the market value. That's a pretty good idea, I home someone does that one day.

 

I don't know if you know this or not, but because of you gamers/collectors don't buy or sell Odyssey games on eBay any longer. It's all gone to web forums, personal sites, and conventions. Ever heard of self-cannibalism? It's relevant.

 

Dick:

 

SO, some people flip houses, cars, what ever. I have chosen to buy and sell video games systems and have been doing it for over 30 years. I am almost 70 years old and started collecting at age 9, by buying stamps and coins. I made great money on coins and old cameras from 1970. Even wrote books and started a collector club, over 5000 members worldwide. So why are you so upset that I have been buying and selling these. 9 out of 10 DO NOT WORK and I spend money having them rebuilt. No one has ever gotten a broken system from me. My feedback speaks for itself. If people are willing to pay 5-600 for a complete system, I am ready to sell it. I have sold over 30 so far, most over 300. I am not screwing anyone. With me they see exactly what they are getting, unlike the broken, incomplete systems offered on ebay auctions. As for selling on auction, they suck.

 

Ther has always been a wide devide between Sellers and Collectors of anything. Collectors want to buy it cheap as posible. Also most sellers on ebay do not ship foreign, most of my big money comes from overseas.

 

Rev. Rob:

 

No, I just think that "people" want to buy things at fair prices. Auctions don't "suck," in fact, auctions are the international standard for setting the value of rare object. Further, your analogy of people who flip houses is a serious fallacy of logic. Investors buy houses low and then sell them at market prices. You by them at market prices and mark them up 300 to 400 percent.

If an investor tried to do that with a home, they would never sell any. As word continues to get out about you and your ethically grey practices, I doubt your sales will be all that good either.

You've really become quite notorious.

 

Dick:

 

So who are you? your image shows GOD and u call yourself a rev., are you god or a preacher????????? Not very God like. You buy action figures and sell nothing, so I guess you are a 30 something kid just trying to cause pain.

 

I do my best to be a good seller, the fact that I take the time to know what I am selling, lets me charge more and get it. I have always sold my items at higher prices because I find people will pay much higher prices for items that are working and from someone who knows what they are selling.

I have something that no one else ever had, 2 stores that offer complete working systems from PONG to Play station, all working. No one has even come close to my inventory and I guess that is frustrating to some collectors.

 

I have had a lot of people saying they will pay more for an item if it is in better condition. And I offer all different conditions.

 

As for the sites that are bad-talking me, I can not find any, but I have heard of them for ages. I know David has taken lots of space on all his sites to slam me, he is no longer posting warning to Magnavox buyers telling them what year the system was actually made, because I have been doing that for him and I have bought all that have come up for sale. I even bought all the inventory of the Atari.com web site, with 2 cib systems, rifle, cib, case, and 30 of the rare extra games, most cib.

 

So, I am sorry you have a problem with me, but I get lots of others who write just to tell me how wonderful it is to find a sellers who has such great inventory and knows what he is selling. These letters out weight the 1 or 2 like you.

 

Go in peace and the love of God,

Dick Sanford

 

Rev. Rob:

 

Has anyone ever told you that your name suits you?

 

I am pretty sure you're delusional. Do you think it's possible that you're speaking to the Lord? And what does my being a reverend or buying action figures for my children have to do with your immoral monopolistic behavior? Greed is a sin, and the Lord hateth a him that soweth discord amung men, a lying tongue, and he who devises wicket plots. Using His name for slander is also a no-no. You can allow your soul to fall into ruins, but I thought you should know that you have some work to do, especially for a man of year years.

 

I would love to see some letters, not reps, but actual letters, of people saying how wonderful

your prices are.

 

Your wide-ranging "inventory" is a moot point. This is eBay. Aside from Odyssey items, everything you sell is offered by another seller for 200% less, and in equal or better condition.

 

There is no justification for greed, Dick, not in the eyes of men, not in the eyes of God.

 

Furthermore, I do see Winters' warning about prices like yours on his website? http://www.pong-

story.com/odyssey_sales_warnings.htm

 

The question is, why do you lie when the lie is easily shown to be invalid? Obviously, the prices that you charge are well above the market value. These are the prices that you purchased your consoles at, by the motivation of greed, you mark them up and artificially inflate the value.

 

If you were a fair merchant, you could sell your items at auction or at market values. However, you're not. Greed has won you over. You're the same as the money changers at the Temple in Jerusalem.

 

Finally, you're not sorry that I "have a problem with you." You are the unrepentant servant of greed and money. Your morality means nothing to you. I am sorry for you, for the kind of person that you are.

 

Obviously you feel that your immorality is justified.

 

Dick:

 

well I guess we will not agree on this issue, and that is fine. The ones I buy at fair value are not complete, and 9 out of 10 do not work at all. So people who buy them on line are getting shafted, where as people who buy them from me are getting fully working and complete systems. My repair man gets 100 dollars per hour and has to spend hours fixing most of the systems. So my buyers are getting great value for their money. Greed is not my intention, but selling something complete and working, that they, and I can be proud of.

 

Rev. Rob:

 

I wasn't comparing your prices to prices of broken console, I was comparing your prices to those of complete, working sets. Thanks for the interview, though.

 

 

-------------

 

He didn't ever provide any of the fan letters that he bragged about having. Nor did he provide any documentation about the costs of his so-called repairs.

 

It's a real shame that one greedy scammer can ruin an entire retro market.

Why do you care about what he is charging? If people were not paying his (Dick)price he would not be selling at such a high price. And about the God talk.......... I seriously doubt God gives a crap one way or another. I do appreciate your passion for fair pricing, but the market determines pricing, not Dick Sanford or you. And for the sake of arguement, lets say he did buy up all the old systems. He is extremely smart for doing so, and can corner the market and set his price and we will pay it or go without.

Edited October 17, 2009 by ericwierson

[VectorGamer]

He's not a crook and he's not doing anything wrong. Just buying low and selling high.

[Bryan]

I certainly don't think God would encourage us to make Odyssey collecting a top priority in life, nor would He encourage us to crudely make fun of someone's name.

Edited October 17, 2009 by Bryan

[ericwierson]

Why do you care about what he is charging? If people were not paying his (Dick)price he would not be selling at such a high price. And about the God talk.......... I seriously doubt God gives a crap one way or another. I do appreciate your passion for fair pricing, but the market determines pricing, not Dick Sanford or you. And for the sake of arguement, lets say he did buy up all the old systems. He is extremely smart for doing so, and can corner the market and set his price and we will pay it or go without.

I certainly don't think God would encourage us to make Odyssey collecting a top priority in life, nor would He encourage us to crudely make fun of someone's name.

I agree with you 100%.

[JamesD]

Just for the record, there are several people buying and reselling items at a markup.

I've been outbid in several cheap auctions only to have the item relisted by the buyer later at a considerably higher BIN price.

[horseboy]

People can charge whatever they want for stuff. Nothing crooked about that. It is kind of silly when people gripe about Ebay prices. If you don't like the price, then don't buy it. That being said, I don't think this is a real great business model. Check his completed listings and feedback. He has only sold a few in the past few months, and he is no doubt sitting on a ton of inventory.

[Rev. Rob]

 

Why do you care about what he is charging?

 

I think it really makes the market for an entire console inaccessible to anyone who wants to become a collector.

 

If people were not paying his (Dick)price he would not be selling at such a high price.

 

Check his completed items. Not a lot of it is selling.

 

And about the God talk.......... I seriously doubt God gives a crap one way or another.

 

I don't even believe that a god exists one way or another.

 

I do appreciate your passion for fair pricing, but the market determines pricing, not Dick Sanford or you.

 

That's what I'm saying.

 

And for the sake of arguement, lets say he did buy up all the old systems. He is extremely smart for doing so, and can corner the market and set his price and we will pay it or go without.

 

I don't think it's smart, I think it's self-cannibalism, and I think it's immoral and unethical.

 

It's not just Odyssey items either, look:

 

$900 for 6 N64s

$800 for a lose heavy sixer and some common games

$500 for a lose Sears Pong

$255 for a lot of 50 boxed commons that are worth at most $2 each

$175 for a boxed 7800

 

Yes, the market should determine prices. These are all well above market prices.

 

It's wrong when people do this kind of thing, and this guy is worse because he's basically bought up an entire market between his two eBay accounts.

Edited October 17, 2009 by Rev. Rob

[STICH666]

Rev, I emailed that twat last month. He put up a snobby attitude and started bashing me for my name. Thanks for bringing this to attention on these forums.

Edited October 17, 2009 by STICH666

[VectorGamer]

But, that Sears Pong looks really nice...

 

I think you're overlooking what the real problem here is. The Sears Pong, for example - he's charging over $12 for shipping via UPS ground!!!

[Bruce Tomlin]

Check his completed items. Not a lot of it is selling.

I think that is the main point here. And in order to get his stuff, he still has to pay more than everyone else is paying. That sort of reduces the potential customer base, if you just turn around and sell them in the same place.

 

It's not just Odyssey items either, look:

 

$900 for 6 N64s

$800 for a lose heavy sixer and some common games

$500 for a lose Sears Pong

$255 for a lot of 50 boxed commons that are worth at most $2 each

$175 for a boxed 7800

 

Yeah? So? If nobody buys them at his absurd prices, all he's going to do is end up with a lot of unsold crap... that he paid actual money for. You can ask any price you want, but you can't force someone to pay it.

[VectorGamer]

 

Yeah? So? If nobody buys them at his absurd prices, all he's going to do is end up with a lot of unsold crap... that he paid actual money for. You can ask any price you want, but you can't force someone to pay it.

 

Yeah - I'm just not getting why this concept is hard to grasp.

 

It's fun busting the chops of someone who eBays "18,000 for a Coleco Telstar" - post the link, let's laugh at him, call him names and move on to the next dope.

 

They say "the market is always right" and it is. If someone wants to pay $18,000 for a Telstar then someone's going to sell it for $18,000. That's the way it is...

[BDW]

If he's really not selling that much and buying that high, why not play the waiting game? This loser will be out of business in a couple of years, just about no one is willing to pay that much for a video game console in the economy.

[ApolloBoy]

If someone wants to pay $18,000 for a Telstar then someone's going to sell it for $18,000. That's the way it is...

 

But how many people are willing to pay that much for a game system in these times? And how long is he willing to wait for someone like that to come around? I never understood that logic.

Edited October 17, 2009 by ApolloBoy

[VectorGamer]

If someone wants to pay $18,000 for a Telstar then someone's going to sell it for $18,000. That's the way it is...

 

But how many people are willing to pay that much for a game system in these times? And how long is he willing to wait for someone like that to come around? I never understood that logic.

 

No one - only an ID10T would pay $18,000 and an ID10T putting an $18K price tag on one.

 

Do these transactions really happen? Do people actually buy an Atari 2600 for $16,000 as was recently posted on eBay?

 

That's nuts - but not crooked. If someone can make that kind of money that's great for them.

[Rev. Rob]

If someone wants to pay $18,000 for a Telstar then someone's going to sell it for $18,000. That's the way it is...

 

But how many people are willing to pay that much for a game system in these times? And how long is he willing to wait for someone like that to come around? I never understood that logic.

 

No one - only an ID10T would pay $18,000 and an ID10T putting an $18K price tag on one.

 

Do these transactions really happen? Do people actually buy an Atari 2600 for $16,000 as was recently posted on eBay?

 

That's nuts - but not crooked. If someone can make that kind of money that's great for them.

 

 

Soo... it's neither crooked nor immoral to rip someone off? That's what you're saying?

[VectorGamer]

If someone wants to pay $18,000 for a Telstar then someone's going to sell it for $18,000. That's the way it is...

 

But how many people are willing to pay that much for a game system in these times? And how long is he willing to wait for someone like that to come around? I never understood that logic.

 

No one - only an ID10T would pay $18,000 and an ID10T putting an $18K price tag on one.

 

Do these transactions really happen? Do people actually buy an Atari 2600 for $16,000 as was recently posted on eBay?

 

That's nuts - but not crooked. If someone can make that kind of money that's great for them.

 

 

Soo... it's neither crooked nor immoral to rip someone off? That's what you're saying?

 

Yes - because it is a transaction mutually agreed upon between buyer and seller.

 

Rip off: I buy $16K Atari 2600 and when I receive it the controller ports don't work.

[+swlovinist]

Like others have said, this person is selling at high prices, but not doing anything wrong. The best thing to do is to not buy his stuff. The market will always correct high prices in the long run. It is not worth getting worked up about.

[Shawn]

I love chocolate cookies.

[nathanallan]

I love chocolate cookies.

Give me cheese with those cookies. Crazy $18,000 cheese. And chocolate chip cookies.

[Rev]

rev rob....leave the old man alone.he isnt doing anything wrong.i think that you are jealous of him or something.this is a FREE market.and if someone is going to pay overinflated prices then so be it.

 

side point:the intellivision market is manipulated too i think :x

[STICH666]

He's holding a monopoly on the market. That IS doing something wrong.

[nathanallan]

Been reading the thread, and have to agree with Stich666-- monopolizing is wrong and shows a lack of ethics and lots of greed. Seems to me they would be sitting there for a long time.

 

Nathan

[Rev]

He's holding a monopoly on the market. That IS doing something wrong.

 

its not illegal but it may be moraly wrong.

 

instead of using monoploly...lets say market manipulation

 

wiki:

 

 

In economics, a monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. Monopolies are thus characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods. The verb "monopolize" refers to the process by which a firm gains persistently greater market share than what is expected under perfect competition.

 

Monopolies can form naturally or through vertical or horizontal mergers. A monopoly is said to be coercive when the monopoly firm actively prohibits competitors from entering the field.

 

In many jurisdictions, competition laws place specific restrictions on monopolies. Holding a dominant position or a monopoly in the market is not illegal in itself, however certain categories of behaviour can, when a business is dominant, be considered abusive and therefore be met with legal sanctions. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic constituency. The government may also reserve the venture for itself, thus forming a government monopoly.

 

Economic analysis

 

In economics, the study of market structures under imperfect competition begins with the analysis of Monopoly. If there is a single seller in a certain industry and there are no close substitutes for the good being produced by him, then the market structure is that of a Pure monopoly. Sometimes, there are many sellers in an industry and/or there exist many close substitutes for the good being produced, but nevertheless firms retain some market power. This is called Monopolistic competition by economists, whereas Oligopoly refers to the case where the main theoretical framework revolves around firm's strategic interactions.

 

A company with a monopoly does not undergo price pressure from competitors, although it may face pricing pressure from potential competition. If a company raises prices too high, then others may enter the market if they are able to provide the same good, or a substitute, at a lower price.[3] The idea that monopolies in markets with easy entry need not be regulated against is known as the "revolution in monopoly theory".[4][verification needed]

 

A monopolist can extract only one premium[clarification needed], and getting into complementary markets does not pay. That is, the total profits a monopolist could earn if it sought to leverage its monopoly in one market by monopolizing a complementary market are equal to the extra profits it could earn anyway by charging more for the monopoly product itself. However, the one monopoly profit theorem does not hold true if customers in the monopoly good are stranded or poorly informed, or if the tied good has high fixed costs.

 

A pure monopoly follows the same economic rationality of firms under perfect competition, i.e. to optimize a profit function given some constraints. Under the assumptions of increasing marginal costs, exogenous inputs' prices, and control concentrated on a single agent or entrepreneur, the optimal decision is to equate the marginal cost and marginal revenue of production (see diagram). Nonetheless, a pure monopoly can -unlike a competitive firm- alter the market price for her own convenience: a decrease in the level of production results in a higher price. In the economics' jargon, it is said that pure monopolies "face a downward-sloping demand". An important consequence of such behaviour is worth noticing: typically a monopoly selects a higher price and lower quantity of output than a price-taking firm; again, less is available at a higher price.[5]

 

There are important points for one to remember when considering the monopoly model diagram (and its associated conclusions) displayed here. The result that monopoly prices are higher, and production output lower, than a competitive firm follow from a requirement that the monopoly not charge different prices for different customers. That is, the monopoly is restricted from engaging in price discrimination (this is called first degree price discrimination, where all customers are charged the same amount). If the monopoly were permitted to charge individualized prices (this is called third degree price discrimination), the quantity produced, and the price charged to the marginal customer, would be identical to a competitive firm, thus eliminating the deadweight loss; however, all gains from trade (social welfare) would accrue to the monopolist and none to the consumer. In essence, every consumer would be just indifferent between (1) going completely without the product or service and (2) being able to purchase it from the monopolist.

 

As long as the price elasticity of demand for most customers is less than one in absolute value, it is advantageous for a firm to increase its prices: it then receives more money for fewer goods. With a price increase, price elasticity tends to rise, and in the optimum case above it will be greater than one for most customers

Edited October 17, 2009 by revolutionika