The Diff

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Index Funds, Monopolies, and Incentives
www.thediff.co

Index Funds, Monopolies, and Incentives

Plus! Collusion, Pull-Forward, Hong Kong, Box Office, Hotels, Intangibles, Politics as Momentum

Byrne Hobart
Jun 22, 2020
2
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Index Funds, Monopolies, and Incentives
www.thediff.co

Conventional economic wisdom tells us that in a competitive market, prices drop to the point that all companies earn their cost of capital and no more. That’s generally good for consumers. In a monopolized market, the monopolist sets prices at a profit-maximizing level, and earns an excess profit at the consumer’s expense. This is a toy model that …

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