Reply To: Predatory Pricing


Great response.
You are correct that the definition of the market place is often the key to making the determination of a monopoly. So for on line search advertising, Google may be dominant and may be deemed a monopoly but as you point out there are other markets for advertising which would reduce Google’s overall percentage of the advertising market.

You are incorrect, however, that for a monopoly to exist it needs to have 100% market share. Courts look to whether the firm has monopoly power to raise prices in part based on market share. If the market share is 75% courts will deem the company a monopoly but that in and of it self does not violated the sherman act, the monopoly must also exhibit “anti-competitive behavior in the exercise of its monopoly position,

To your point if online advertising were dominated by Google and there was no credible alternatives for price and volume, consumers would spend their advertising money offline.

Eventually, as you also point out an online competitors to google would emerge and be able to charge less. The interesting point is how would these competitors emerge-in order to be able to provide advertising opportunities the competitor would need to build audience and would need to compete with the free services that google offers.

That lead me to the blog post idea that perhaps a competitor might have to pay users to build audience to compete with Google’s free.