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I think if you’re solving for the “maximize easiest money” above a minimum (like say you want the laziest way to make at least $10 million/year), your best bet is to be approximately twice as good as next two rivals.
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So if A = 9, B = 5, C = 4, nominally, A=B+C so it looks evenly matched. Innovative new entrants avoid entering because it looks like an actively contested market with no lazy/corrupt monopoly incumbents. But actually A > B+C because of high alliance coordination costs.
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You have all the real benefits of being a monopolist (rent-like easy money), but not the target on your back from POV of either regulators or disruptive startups. Startups often want to take on monopolies with the next great idea, but apparent oligopolies are less attractive.
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Regulators see real competition and go away. Disruptors see that it’s not a winner-take-all, so they walk away. So you end up with sweet winner-takes-most. Only reason to even try to grow overall market (nonzero sum) or market share (zero sum) is if your minimum need isn’t met.
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The default case is when all 3 are supplying the same thing, but can also be analyzed in scope ways. A sells good big and small widgets, B sells better small widgets, C sells better big widgets.
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Customers who need only one size buy A if price sensitive, B or C otherwise. Customers who want both though face integration costs and will prefer A more, because B and C cost more both nominally and introduce extra hidden costs. Hence one-stop-shop platform economics.
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If the economies of scale additionally have high sensitivity at larger scales, you can be low-cost leader AND have higher margins. This reinforces the A vs B+C equilibrium because remember A only has to not-lose.
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Can’t share the actual examples I’m thinking through, and can’t think of perfectly clean examples, so would welcome examples for my case files. One good approximate example I have no stake in is Apple vs Google Android+Samsung in phones. Maybe Boeing vs Airbus+Bombardier?
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I avoided quoting this because it’s closer to winner-take-all than I’m thinking of 😄 A vs B+C is more like first prize BMW, second prize Toyota Corolla, third prize, used Kia. If you just want a functional car third prize us actually fine.
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Replying to @vgr
First prize: Cadillac Second prize: steak knives Third prize: you’re fired
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