So... Monopolies

[Vohen]

Yeah, Monopolies will be in the game, and apparently they'll be a great thing to have, which is, at the very least, very unfortunate.
To speak very briefly, for capitalism, competition is its lifeblood, it's what makes companies streamline their production to be as cheap and efficient as possible, to get the lowest prices possible on the market and thus be ahead of the competition.
This has implications in several fronts, be it on the consumer side, where one can choose the brand offering the best products/prices, be it on the innovation front, where companies seek this best product or the most efficient production method.
Monopolies, on the other hand, is where this all goes to die, companies achieving a market monopoly can essentially dictate market conditions to their favor, at the expense, specially, of the consumer. They also tend to stagnate, with no real push for innovation. That's why most (if not all) countries have severe antitrust and anti-monopoly laws.

Now, companies are a very valuable addition to the game, representing very specific know-how and specialization of industry.
Ideally, we could have a couple or few companies in the same sector, the more we got the bigger their bonuses, representing their competition with one another (or maybe that'd be a bit much).
That's pretty much how I abstracted companies to begin with, as a representation of several actual companies growing and competing together, giving us the bonuses we got.
But now we have actual monopolies, which goes against all that.

I want to add that, I don't see an issue from a gameplay standpoint, this mechanic might even be necessary since the 1.8 rework made them weaker, and anything fostering industrial specialization is great for adding variety in gameplay.
Thing is, naming it a monopoly is just... unfortunate.

 

[TheFlemishDuck]

Are you perhaps associated with the Chicago school of economic thought or the Von mises institute? Praise the free market and the ideal of perfect competition that hardly ever tends to pan out, right! Well i have to confess that 'im too complaining on a almost daily basis on the Duopoly held by Telenet and Proxximus in the Belgian telecommunications industry to the detriment of having prices that are just double of that what our neightbours in France pay coupled with shitty service to boot. Crapitalims, its so lovely!

But ok, monopolies can be of a varried nature and that can even be so in geopolitical relations. if a country in this game takes a treaty port on a isolationist country, then it has sole acces to trade with that market where others dont have, you can consider that monopoly access and it can be utilized for the benifit of the state or the wealth of the nation. There are private monopolies and there are those that the states might have, up to things like the British having a quasi monopoly on the lucrative opium trade to China.

 

[Citizen Caen]

Well i have to confess that 'im too complaining on a almost daily basis on the Duopoly held by Telenet and Proxximus in the Belgian telecommunications industry to the detriment of having prices that are just double of that what our neightbours in France pay coupled with shitty service to boot. Crapitalims, its so lovely!

>mentions a highly regulated industry
>the top player of which is Proximus which is majority government owned
>blames capitalism for the resulting monopoly

 

[TheFlemishDuck]

Sure but telenet is not government owned but they and Proximus control the BIPT and maintain their duopoly in that fashion. Your remark isnt withough merrit for the specific case but seeing as you aswell acknowledge that despite "the ideals of perfect competition" monopolies and duopoly's naturally occur or want to do so anyway its also but an objection to the specific case and not the principal point. Its not an exclusive state thing, we can talk a bit about who came to control the majority interest in US railways in the gilded age as an example. The robber barons of the gilded age, its a thing. names like JP Morgan, Cornelius Vanderbilt, John D Rockefeller and Andrew Carnegie should ring a bell that is very relevant to this discussion and for this age.

And thats besides many other things that dont follow the "hardcore rules of capitalism" when its not up to the liking of the capitalist elite class. Banking crisis? government bailouts! Can't let the normal market procedures dictate what should happen if thats not in their interest, not that they would return their bonus for a good previous performance .. on paper.

There is no universal acknowledgement of all the merits of very market liberal or neoliberal economic thinking in that regard and the true existance for the ideal enviroment they promise, sometimes this idealism is either pedled as socioeconomic propaganda or is held as obvious true by some but economics is complex and has many streams. This game can just aswell hold itself more to "realist thought" on what happens in economics, especially considering that it also wants to model various economic systems like communism for example. So lets have those monopolies and duopolies and things like price agreements and such in game and lets have the player either potentially profit from them or having to "deal with them". your taliking about country's that have anti-trust law and ... are also serious about actually enforcing them ... well lets have perhaps relevant to this also an anti trust law in the laws tab or have it associated with any economic or political system. Even the existance of anti trust law afterall acknowledges by default that such monopolies can naturally occur despite the idealism of "perfect competition" thought.

 

[Citizen Caen]

Sure but telenet is not government owned but they and Proximus control the BIPT and maintain their duopoly in that fashion. Your remark isnt withough merrit for the specific case but seeing as you aswell acknowledge that despite "the ideals of perfect competition" monopolies and duopoly's naturally occur or want to do so anyway its also but an objection to the specific case and not the principal point. Its not an exclusive state thing, we can talk a bit about who came to control the majority interest in US railways in the gilded age as an example. The robber barons of the gilded age, its a thing. names like JP Morgan, Cornelius Vanderbilt, John D Rockefeller and Andrew Carnegie should ring a bell that is very relevant to this discussion and for this age.

And thats besides many other things that dont follow the "hardcore rules of capitalism" when its not up to the liking of the capitalist elite class. Banking crisis? government bailouts! Can't let the normal market procedures dictate what should happen if thats not in their interest, not that they would return their bonus for a good previous performance .. on paper.

There is no universal acknowledgement of all the merits of very market liberal or neoliberal economic thinking in that regard and the true existance for the ideal enviroment they promise, sometimes this idealism is either pedled as socioeconomic propaganda or is held as obvious true by some but economics is complex and has many streams. This game can just aswell hold itself more to "realist thought" on what happens in economics, especially considering that it also wants to model various economic systems like communism for example. So lets have those monopolies and duopolies and things like price agreements and such in game and lets have the player either potentially profit from them or having to "deal with them". your taliking about country's that have anti-trust law and ... are also serious about actually enforcing them ... well lets have perhaps relevant to this also an anti trust law in the laws tab or have it associated with any economic or political system. Even the existance of anti trust law afterall acknowledges by default that such monopolies can naturally occur despite the idealism of "perfect competition" thought.

Yes but Telenet itself has an exclusive partnerships with the Flemish regional government being the official preferred supplier of all telecommunications for Government services and buildings. Quite the public-private relationship they have there.

Look I’m not even saying that a mythical true free market is this unbeatable perfect thing. In the real world there are many examples of extenuating circumstances (natural monopolies being one) that make free market competition either unrealistic or undesirable. But I thought it was funny that your anecdotal example was a perfect case for what the OP is saying which is government sponsored monopolies often have detrimental effects for the consumer, which is exactly what you were complaining about “double the price, coupled with shitty service”

Also I’d caution just dismissing economic theories around economic competition as completely bunk idealogy. They are describing very real phenomena observed in low-barrier of entry industries and the advantages they bring to prices. Whether that’s applicable to wider society is another discussion but I think it’s important to be open about the evidence either way.

 

[TheFlemishDuck]

Yes but Telenet itself has an exclusive partnerships with the Flemish regional government being the official preferred supplier of all telecommunications for Government services and buildings. Quite the public-private relationship they have there.

Look I’m not even saying that a mythical true free market is this unbeatable perfect thing. In the real world there are many examples of extenuating circumstances (natural monopolies being one) that make free market competition either unrealistic or undesirable. But I thought it was funny that your anecdotal example was a perfect case for what the OP is saying which is government sponsored monopolies often have detrimental effects for the consumer, which is exactly what you were complaining about “double the price, coupled with shitty service”

Also I’d caution just dismissing economic theories around economic competition as completely bunk idealogy. They are describing very real phenomena observed in low-barrier of entry industries and the advantages they bring to prices. Whether that’s applicable to wider society is another discussion but I think it’s important to be open about the evidence either way.

Yes yes, we can talk a lot of economic theory on this forum, but what does it mean for the game?

it's the thing i have with "ideological lectures" or claims etc made, though you can argue that i counter with something similar. At the end the point i make is one that mainly relates to the game and what we want in there. So can we just recognize that having one Cornelius Vanderbilt monopolizing your railway sector as the US is a functional thing to emerge in the game for the purpose of immersion? I think it is right? And the moral aspect of monopolies within an idealized concept of economic relations isnt really relevant to it. Lets go by the realities history tells us about as guideline rather than idealized economic frameworks that you could use as model?

For the rest i really dont even want to start a ideological debate, please spare it. Really. More historical reference less economical theory or contentious ideological and philosophical economic debate please, we could spend ages on that stuff and get nowhere with it too.

 

[Citizen Caen]

Yes yes, we can talk a lot of economic theory on this forum, but what does it mean for the game?

it's the thing i have with "ideological lectures" or claims etc made, though you can argue that i counter with something similar. At the end the point i make is one that mainly relates to the game and what we want in there. So can we just recognize that having one Cornelius Vanderbilt monopolizing your railway sector as the US is a functional thing to emerge in the game for the purpose of immersion? I think it is right? And the moral aspect of monopolies within an idealized concept of economic relations isnt really relevant to it. Lets go by the realities history tells us about as guideline rather than idealized economic frameworks that you could use as model?

For the rest i really dont even want to start an ideological debate, please spare it. Really. More historical reference less economical theory or contentious ideological and philosophical debate please.

Ok in gameplay terms, what if granting companies exclusive monopoly status (or perhaps them attaining it themselves) wasn’t a completely good thing but a trade off.
Something like monopoly getting excellent throughput and trade advantages but also reducing price elasticity from buy and sell orders. What I mean by this is something like a MAPI modifier that causes the price of a good to be higher than what the normal supply-demand function would indicate, with the company receiving the surplus value (instead of being deleted like MAPI)

What this would do is two things:
1. Increase company profits and therefore reinvestment, overall GDP, and Taxes
2. Reduce POP SOL from having to pay higher prices

IMO that’s a much more interesting gameplay choice than if granting monopolies was only a throughput boon

 

[TheFlemishDuck]

Ok in gameplay terms, what if granting companies exclusive monopoly status (or perhaps them attaining it themselves) wasn’t a completely good thing but a trade off.
Something like monopoly getting excellent throughput and trade advantages but also reducing price elasticity from buy and sell orders. What I mean by this is something like a MAPI modifier that causes the price of a good to be higher than what the normal supply-demand function would indicate, with the company receiving the surplus value (instead of being deleted like MAPI)

What this would do is two things:
1. Increase company profits and therefore reinvestment, overall GDP, and Taxes
2. Reduce POP SOL from having to pay higher prices

IMO that’s a much more interesting gameplay choice than if granting monopolies was only a throughput boon

Its a fair suggestion.

I was rather thinking of "the kind of monopolies states can love" and "the kind of monopolies states will hate". The player plays from the perspective of state interests foremost, economic soundness is not always its primarily goal if a bit of meddling can strenghten the government budget more in particular. monopolies backed by the state which are to the interest of the state can help, whereas there will be cases where monopolies can be wholely to the detriment of state interest, its only increasing the costs of certain things and lining the pockets of men who hardly pay taxes to boot. So i guess you could have monopolies that come with pro's and cons and that itself is fine, and then monopolies which are great for the state and those which the state would never choose for but emerge per event anyway and which is a bane to get rid off, indeed perhaps requiring the passing of anti-trust laws against the will of powerfull industrialists that lobby and/or bribe government and then having to give up your own lucrative monopolies with it for consistency sake.

 

[prismaticmarcus]

For the rest i really dont even want to start a ideological debate, please spare it. Really. More historical reference less economical theory or contentious ideological and philosophical economic debate please, we could spend ages on that stuff and get nowhere with it too.

This.

 

[Secret Master]

If we are going to get monopolies, there better be some disadvantage. Right now, if you can stack all industries of a certain type under a single company, it can yield tremendous benefits. Imagine an oil or automobile (or both) monopolies for companies that boost their throughput.

 

[Galadredid]

Since this is coming in an international trade expansion, it is worth mentioning that the 'good' things (from the monopoly's perspective) can often come when a monopoly on an international scale is competing with non-monopolies in other countries.

The monopoly does make things expensive for its domestic consumers. But it can then invest that in making its products artificially cheap and sell at a loss abroad, aka dumping. This allows the monopoly to make the foreign manufacturers unprofitable, crashing them and buying up more market share within that country. That of course depends on the foreign country not clamping down with tariffs, but maybe that isn't politically viable for some reason (treaty ports, it's an unrecognized country, it's a much smaller competition, etc.). In any case it's worth considering in an expansion about international trade.

When it comes to competition and innovation, the world stage vs national thing is another thing that turns the tables on the traditional narrative. Centralizing capital more means that you can quickly and easily make those expensive investments to upgrade, while the diversified companies elsewhere lag behind. An example in the game's timeframe would be Germany's advantage with cutting-edge research while it had many cartels.

 

[Byamarro]

The main association people have with monopolies is negative one. While useful monopolies can be a thing, the game design shouldn't ignore the fact how monopolies are perceived nowadays as it will be immersion breaking.

Show both sides, immerse player in what the player knows and then extend the player's horizons by showing that monopolies can also be useful.

 

[Prob32]

Strictly speaking(Econ theory), monopolies should look to maximize returns for shareholders, that means there's an ideal consumption pattern that isn't a shortage price, probably somewhere in the +10% base price range. The reason for this is that if there's plus +25% cost for a good, a monopoly can expand and still make more marginal returns by dropping to a lower price. The price will be higher than perfect competitive market.

There are downsides to monopolies as @TheFlemishDuck point's out but they're not really modeled in the game as we don't have sector specific innovation trees, companies meddling in politics or worker radicalism tied to companies in anyway. Companies also pay the same wages as non companies. It's the same thing with the entire LF economy law, it has absolutely no downsides modeled: watering down of stock ( yes that was invented in this period), malinvestment or overspeculation

 

[Timewalker102]

The biggest concern I have with the mechanics pack company changes is that it smells like another EU4/HOI4 style modifier stacking fest (like Power Blocs were). If monopolies are in the game I hope they actually affect the simulation rather than just being a +whatever -whatever modifier tradeoff.

 

[yurcick]

The monopolies should act, well, monopolistic.
And the main difference is pretty easy to explain, and the explanation works well within the economic model of V3 (where prices are a direct function of supply and demand).

A firm on a competitive market has no chance of changing the prices by manipulating output levels.
So when it wants to maximise profits with constant production costs, it has to maximise its outputs.
This behaviour is beneficial to the society as a whole, so the goals of the individual profit-seeking agents and the society at large (aka player) are aligned.

With monopoly, it's not the same.
A monopoly has
1) cash reserves and market power to buy out or suppress those who try denying it the next point
2) options to meaningfully inflate market prices by reducing output
That means that the effective level of production (the one that maximises its profits) for a monopoly is lower than the maximum it's able to get, and in that, its interests are not aligned with interests of the player.
That's what's harmful about them, and that's what I'd like to see implemented in game: monopolies actively trying to corner the market (by having the mechanical ability and desire to buy out independently-owned industries in their category) to jack up prices by shrinking the supply.

If it's unclear why reducing output can be beneficial for a monopoly, here's a spreadsheet:

	Monopoly's output	Non-monopolistic supply of the goods	Total supply of the output goods	Total demand of the output goods	Price of the goods	Input and labour cost per unit of goods	Profit per unit of goods	Total profit for the monopoly
Scenario A (maximise output)	1000	200	1200	1200	20 (base price)	18	2	2000
Scenario B (maximise profits)	400	200	600	1200	35 (+75%)	18	17	6800

 

[VineFynn]

For the rest i really dont even want to start a ideological debate, please spare it. Really. More historical reference less economical theory or contentious ideological and philosophical economic debate please, we could spend ages on that stuff and get nowhere with it too.

Supposing that's really what you want, don't open with this:-

Are you perhaps associated with the Chicago school of economic thought or the Von mises institute? Praise the free market and the ideal of perfect competition that hardly ever tends to pan out, right! Well i have to confess that 'im too complaining on a almost daily basis on the Duopoly held by Telenet and Proxximus in the Belgian telecommunications industry to the detriment of having prices that are just double of that what our neightbours in France pay coupled with shitty service to boot. Crapitalims, its so lovely!

 

[Amina144]

The biggest concern I have with the mechanics pack company changes is that it smells like another EU4/HOI4 style modifier stacking fest (like Power Blocs were). If monopolies are in the game I hope they actually affect the simulation rather than just being a +whatever -whatever modifier tradeoff.

It will be the case seems like it. The companies already function like that.

 

[IsaacCAT]

As far as I understand the info we have so far, monopolies are very bad to increase output unless you can build and sell to companies directly. In any case, under a monopoly the player should not be able to build any additional level. As already said, monopolies do not want to lower prices, they will be more than happy to keep base price +50%.

Another thing monopolies are very bad is technological innovation. I hope they add malus to the tech tree for those inventions linked to all buildings under a monopoly.

• Monopolies - Boost the efficiency of selected buildings and grant your Companies an exclusive right to certain industries, ensuring their dominance

 

[Prob32]

The monopolies should act, well, monopolistic.
And the main difference is pretty easy to explain, and the explanation works well within the economic model of V3 (where prices are a direct function of supply and demand).

A firm on a competitive market has no chance of changing the prices by manipulating output levels.
So when it wants to maximise profits with constant production costs, it has to maximise its outputs.
This behaviour is beneficial to the society as a whole, so the goals of the individual profit-seeking agents and the society at large (aka player) are aligned.

With monopoly, it's not the same.
A monopoly has
1) cash reserves and market power to buy out or suppress those who try denying it the next point
2) options to meaningfully inflate market prices by reducing output
That means that the effective level of production (the one that maximises its profits) for a monopoly is lower than the maximum it's able to get, and in that, its interests are not aligned with interests of the player.
That's what's harmful about them, and that's what I'd like to see implemented in game: monopolies actively trying to corner the market (by having the mechanical ability and desire to buy out independently-owned industries in their category) to jack up prices by shrinking the supply.

If it's unclear why reducing output can be beneficial for a monopoly, here's a spreadsheet:

	Monopoly's output	Non-monopolistic supply of the goods	Total supply of the output goods	Total demand of the output goods	Price of the goods	Input and labour cost per unit of goods	Profit per unit of goods	Total profit for the monopoly
Scenario A (maximise output)	1000	200	1200	1200	20 (base price)	18	2	2000
Scenario B (maximise profits)	400	200	600	1200	35 (+75%)	18	17	6800

Yes this is the idea but I think the scenario here is a bit extreme- it’s been awhile since my micro econ frameworks but the maximize profits scenario is more in the 600-800 range depending on other factors.

 

[yurcick]

Yes this is the idea but I think the scenario here is a bit extreme- it’s been awhile since my micro econ frameworks but the maximize profits scenario is more in the 600-800 range depending on other factors.

To be honest, I didn't bother to calculate the actual volume at which the profits are maximised, only shown that it could bring you massively higher profits if you bring down the volumes.
But since the elasticity function is known and simple, this is actually high school calculus (which I haven't done for over 10 years, let's hope I won't shoot myself in the foot). You have to write profits as a function of volume, find its derivative function and find its zeroes.

profit(volume) = (price - cost) * volume = (base_price*(1+0.75*(total_demand-total_supply)/total_supply)) - cost) * volume = (base_price*(1+0.75*(total_demand-(volume+external_volume))/(volume+external_volume)))-cost) * volume = (20*(1+0.75*(1200-(volume+200))/(volume+200))-17) * volume = (-12 * volume^2 + 15600 * volume) / (volume + 200)

We're looking for a maximum, and at this point the derivative of profit by volume should equal zero. So, with a little help of Wolfram, "- 12 * (volume ^2 + 400 * volume - 260000) / (200 + volume) ^2 = 0".
The denominator is never zero with positive volumes, and -12 is never 0, so essentially volume^2 + 400volume - 260000 = 0.
volume = (-400 +- (1200000)^1/2))/2
The only positive solution of the two is about 347, which would give the monopoly about 7250 in profit instead of 6800 in my example.

However, we understand that when supply falls lower than 600, or output falls lower than 400, the price caps at +75%, it doesn't get higher.
So my initial statement that 400 is the most effective output level for the monopoly was, by accident, correct under stated circumstances (external supply is fixed at 200, cost per unit is fixed at 17).