How does the Free market prevent Monopolies?

Question

How does the free market prevent monopolies? Is there some sort of internal mechanism that regulates it self to prevent monopolies?

I feel the "new technologies" argument doesn't really have a place in this argument. It seems like thats just saying at some point a company will have poor foresight? Can poor foresight be really applied in a hypothetical free market. Seems more like human error than anything else.

Answer 1

A truly free market doesn't prevent monopolies. They happen when one company selling a service or product is so good, so competent, or so well advertised that the squeeze they competition out of buisness.

Monopolies can only be prevented by governmental intervention.

Answer 2

Yes. Given enough time, markets tend to self-regulate. A 'monopoly' can grow so large that it cannot adapt quickly enough. Someone small does it better. New technology replaces old technology. New ideas supplant old ones.

Who ever would have thought that Kodak would be all but out of the film business? They reacted too late to the threat of digital technology and instead of seizing it, ignored it until it almost killed them. They will survive as a company, probably, but at one time, they practically had a monopoly on the photographic film business.

Why there is government intervention to 'break up' monopolies is owed to human impatience, not that markets can't regulate themselves.

Answer 3

It doesn't. No there is not. That's why we have laws against it. See "robber barons". And "Microsoft".

p.s. what Curtisports2 is talking about is sometimes correct, but not always. Where there are large economies of scale, no competitor would be able to break into the market. For example, electrical power generation. It is much cheaper, in terms of $/kWh, to build a 100,000 MW electric plant than a 1000 MW electric plant. And much cheaper still to build a 10,000,000 MW electric plant.
The other point I would raise is why would we wait for some unspecified time in the future, when competition will hopefully arrive, to prevent a monopoly from ripping us off?