Originally Posted by liberty

When has this scenario ever played out? The fact is, setting a low price to undercut competition is a lot harded than it sounds. In order to run all companies out of business, Comp. 1 will have to keep prices low for a long time. This means losing a lot of money. So, if Comp. 1 succeeds in driving out all competitiors, it is going to have one hell of a time when another competitor comes on the market. It has alread lost a lot of money from this scheme to undercut competition, it can't afford any new competition. Comp.1 will be engaged in a never-ending price cutting war in which it will never succeed. Some other company is always in the wings, waiting to take over the customers. Every time this happens, the Comp. 1 must do one of two things. 1) Make an awesome offer to the competing company for a purchase. This is unlikly because the competing company will request much more money than it believes it will ever make. 2) Continue to undercut, and continue to lose. This will not go on for long.

Also, if a company continues to undercut competition as you suggest, other companies will simply hold their goods off the market and sell them when Comp.1 increases prices. This will really do damage to Comp. 1.

This is why companies need gov't to inhibit competition in order to form a monopoly. When has a monopoly risen from a free market. I want an actual example.