Linked by Kroc on Thu 30th Aug 2007 13:03 UTC
Editorial I hear often that when something new appears that "competition is good". The primary reasons competition is seen as good, are: it drives down prices; it gives consumers more choice; it pushes technology forward, quicker. Competition is not good because: competition is why consumers have to choose between HD-DVD and BluRay; competition is why DRM exists; and more. In this article, each of the supposed benefits of competition will be looked at in more detail.
Thread beginning with comment 266957
To read all comments associated with this story, please click here.
by Noremacam on Thu 30th Aug 2007 13:19 UTC
Member since:

Quote: "When the opponent is beaten, there is no need to continue with any of the competitive actions, such as lowering prices or improving technology. Competition ultimately ends with stagnation and vendor lock in."

Isn't that an argument for competition? As soon as competition stops the winning product stagnates? Look at Internet Explorer 6. It stagnated until firefox hit the big scene. I think that's an argument for competition, not against it.

Reply Score: 26

Two kinds of competition
by RandomGuy on Thu 30th Aug 2007 13:51 in reply to "Oops..."
RandomGuy Member since:

Yep, that's what I thought, too.

To me it seems there are two kinds of competition:
competition of products and competition of formats/standards.

The first is obviously good as we can see by the IE example.
If somebody creates a competing product, say, a nicer web browser or DVD player, etc, I cannot see the harm.

It is only when different companies try to dominate the market by pushing their own, incompatible and often closed "standards" that competition becomes harmful.

This is what has happened with IE-only sites or Documents in some closed formats:
You are locked into using one application because the data is not stored in an open format or (in the case of IE-only sites) uses behavior of IE that is not part of an open standard. Another example are DVD or video formats.

I think a good comparison (don't be afraid, no cars ahead ;-)) are railways:
You can have competing companies, using different kinds of trains and having different schedules and prices but the basic, underlying infrastructure has to be standardized. It does not make sense for every company to use a different, incompatible railway type.

Formats/standards/infrastructure is, imo, one of the few areas where competition and free market lead to suboptimal results.
The reason is that competition works best on a level playing field. By allowing competition on data formats and standards you basically allow the players to change the playing field and the outcome will very likely be tilted in favor of whoever puts most money in pushing his own "standard".

Reply Parent Score: 10

RE: Oops...
by Kroc on Thu 30th Aug 2007 14:42 in reply to "Oops..."
Kroc Member since:

It's a cycle. You get competition, and one wins, then you get stagnation, and then it starts over again. Nobody really wins in this cycle. It feels like good is happening, but that's just the cycle of movement.

If there was no competition, Microsoft would have supported the standards in IE because they wanted too. There wouldn't be a reason to exclude standards for anti-competitive actions et al.

Reply Parent Score: 2

RE[2]: Oops...
by rhyder on Thu 30th Aug 2007 18:11 in reply to "RE: Oops..."
rhyder Member since:

I don't agree with your point, Kroc. In the PC hardware market, there are lots of competing companies. You predict that stagnation is the inevitable consequence of competition. Yet, the hardware market features a steady pace of innovation and new development.

As someone else pointed out, MS went years without developing IE. They kept improving their product when they had competition and resumed improvements when substantial competition reemerged.

If it weren't for desktop Linux and the Mac, I'm sure that we would still be running Windows 95, at best.

Who knows how far things would have developed in terms of operating systems and software if MS had been kept under control and forced to operate within the law?

You seem to repeatedly state a principle that competition leads inevitably to stagnation but there are many perfectly healthy technology markets in which competition is fierce and development is healthy. PC hardware and mobile phones would be two obvious examples.

What motive would a single producer of VHS videos and cassettes have to develop a successor if it were not for competition? Same argument goes for a single producer of 286 PCs.

Reply Parent Score: 3

RE: Oops...
by Adurbe on Thu 30th Aug 2007 15:16 in reply to "Oops..."
Adurbe Member since:

The reason for the stagnation was the goal of the company involved.

Microsoft created IE to BEAT Netscape, not for the user to browse the web. As such when its goal was complete it didnt need to do anything else.

Competition is a good thing only if the GOAL is good

Reply Parent Score: 4