oligopolies are pretty bad at maximizing their market success
I think they are pretty good at it, but maybe you don’t mean what I mean.
In the simple model, there are three things that might be maximized.
Individual producers profits,
the sum of individual producers profits aka producer surplus, or
the sum of producer surplus and consumer surplus.
I think its useful to model 1. individual producers as profit maximizers across a wide variety of markets, including oligopolies.
producer surplus is generally not maximized, but will be actually larger with an oligopoly than in a competitive market
the sum of producer surplus and consumer surplus can be understood to be maximized in a competitive market
Perhaps none of this is in conflict with anything you said, afterall, you explicitly pointed out that the market creates/identifies maximizers, I just couldn’t tell what you meant in the sentence I quoted. Disclaimer: more complex models can be more accurate, my point is only that these simple models of maximization are useful.
I meant I’m predicting that modeling monopolies/oligopolies as entities that try to optimize their profit is going to be unsuccessful.
I predict they will be very successful at creating barriers to entry (oligopolies that do that better stay in game longer), and they will be bad at responding to market changes in a way traditional economics claims they would (difference in profits matters very little to their survivability, profits that are too high might even encourage entry of competitors what would threaten their status).
I meant I’m predicting that modeling monopolies/oligopolies as entities that try to optimize their profit is going to be unsuccessful.
I agree that fine-grained predictions of a firm or an industry’s behavior will not be possible with such a model. But whether the model is good or not depends on what you’re comparing it to and what you’re using it for. So what would you like to compare it to? What is your preferred model?
To be more specific, lets take Microsoft. I think that for many purposes, it is useful to think of Microsoft as attempting to maximize long-term profits.
nitpick:
In the simple model, there are three things that might be maximized.
Individual producers profits,
the sum of individual producers profits aka producer surplus, or
the sum of producer surplus and consumer surplus.
I think its useful to model 1. individual producers as profit maximizers across a wide variety of markets, including oligopolies.
producer surplus is generally not maximized, but will be actually larger with an oligopoly than in a competitive market
the sum of producer surplus and consumer surplus can be understood to be maximized in a competitive market
Perhaps none of this is in conflict with anything you said, afterall, you explicitly pointed out that the market creates/identifies maximizers, I just couldn’t tell what you meant in the sentence I quoted. Disclaimer: more complex models can be more accurate, my point is only that these simple models of maximization are useful.
I meant I’m predicting that modeling monopolies/oligopolies as entities that try to optimize their profit is going to be unsuccessful.
I predict they will be very successful at creating barriers to entry (oligopolies that do that better stay in game longer), and they will be bad at responding to market changes in a way traditional economics claims they would (difference in profits matters very little to their survivability, profits that are too high might even encourage entry of competitors what would threaten their status).
I agree that fine-grained predictions of a firm or an industry’s behavior will not be possible with such a model. But whether the model is good or not depends on what you’re comparing it to and what you’re using it for. So what would you like to compare it to? What is your preferred model?
To be more specific, lets take Microsoft. I think that for many purposes, it is useful to think of Microsoft as attempting to maximize long-term profits.