In Chapter 10, we discuss monopoly, degrees of monopoly power, and the “price searching” behavior of firms who have discretion over price. We detail various (natural and artificial) barriers to entry (and exit). We provide a conventional description of the inefficiencies of monopoly power, but also note how the possibility of (at least short-term) monopoly profits provides a useful (if not necessary) incentive for entrepreneurs to innovate and create new markets.

Predicting the future is a perilous exercise. But that has not stopped us trying. Hunter-gatherers carefully studied their natural environment to predict food availability. The earliest farmers developed sophisticated ways to predict rain. In the eighth century BCE the oracle of Delphi attracted to her temple those who wanted to know the future. Others have searched for clues to future events in bones, marbles, cards and crystal balls. For a quick fix, just page to the horoscope section in your daily newspaper.

It makes sense to want to know the future. Knowledge is power. And power is money. Entrepreneurs must predict the future demands of their customers, the behaviour of their competitors, and the cost of their inputs. In more volatile environments, prediction is more difficult, which increases risk and requires higher reward. That is why it is so difficult to attract investment in unstable times.