The Iron Law of Pentopoly
Pentopoly may be stronger than monopoly.
Patrick’s proposed Iron Law of Pentopoly is this. If the number of market participants is five or less they will collude to raise prices while reducing services. This very well may happen with larger numbers of participants, but the Iron Law is that with five or less it is a certainty.
How about merging to become a monopoly? This deprives customers of all power. Monopolies have no need of an excuse for raising prices while reducing services. Such was widely practiced in the 19th century USA, leading to anti-monopoly laws. Today such laws are seldom enforced. However it is true that in the case of highly unpopular companies such as Comcast their desired megamergers may be thwarted. How to avoid such hindrance?
The Iron Law of Pentopoly tells us that it not necessary to achieve a monopoly to accrue such power. Limiting major market participants to five is enough. Today, examples abound. The most prominent perhaps is the five companies that control the lion’s share of the media of the USA. While there may be smaller competitors, they face such obstacles to growth -- often imposed by a pentopoly-friendly government -- that they pose no threat to the pentopoly. I say that the pentopoly’s veneer of competition lowers resistance, contributing a staying power that might elude a monopoly. And so it is today.