I will likely have some follow up questions related to this question, but to start I will just post my first question:
In the case of gains to factors, just because the desire for the factor has increased, I don’t see how the gains are realized by the producers of the factor of production. As Rothbard puts it: “If the Staunton Company bought these machines from other producers, then any monopoly gains would, in the long run, as the machines were replaced, accrue to the producers of the machines.” If the factor producer market is competitive and the monopolist is not, wouldn’t the monopolist have the monopsony power to dictate terms of purchase?
Alternatively, if a market entrant buys a particular factor as they enter, this process could take years if you have multiple fixed factors yes? It seems to leave room for antitrust improvements in the short term. This also assumes there is room for extra firms in the market. If you have more than one fixed factor in the process and the monopolist now has to pay a higher price for the existing factor of production, it begs the question: does the market have room for the entrant and incumbent firm given the new cost structures? Or does this say push the aggregate average cost curve far enough that the two firms incur marginal losses?
At this point, the monopolist seems to still have the advantage if the fixed factors are quite specific to the production of that particular monopolized product or service. Since there is plausibly a price range at which they will prefer to ‘burn’ through their other specific factors (sunk costs) before exiting the market; I recognize this probably works best if there are no good alternative uses for their factors of production. I guess what I’m asking is what is wrong with my special case and how does the arbitrage process work in these instances? As always I appreciate you taking the time to answer these question Dr. Herbener!
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