This buy-up argument is impossible in a free market.
Let's say there are 10 people renting apartments that a monopolist plans to buy out, and each of their properties are 'worth' $1, meaning you could reasonably expect to pay $10 for one property. They also rent out their appartments for $1 each.
What happens when the monopolist starts buying properties? He buys a few, and they notice he's going for a monopoly. They will raise their prices, because they know it will be worth it for the monopolist to pay $20 or even $30 to aquire their properties.
Let's say, through a miracle, the monopolist endures these exponentially growing raised prices, buys 9 of the 10 properties, and raises rates to $3 to cover the losses he's had to put into buying his last couple of properties.
Well, the 10th would be able to rent his land out at nearly the same price as the monopolist, say $2.50. But notice that the 10th property owner didn't have to over-pay for his land, so he will is making way more profits than monopolist, which would price his property out of the range of the monopolist.
> Let's say there are 10 people renting apartments that a monopolist plans to buy out
You aren't making sense. The monopolist doesn't buy "10 apartments", they just buy the entire building since those 10 people are "renting." You only have to buy from the person who owns the building; even in an non-free market renters have no ownership rights.
> Well, the 10th would be able to rent his land out at nearly the same price as the monopolist, say $2.50. But notice that the 10th property owner didn't have to over-pay for his land, so he will is making way more profits than monopolist, which would price his property out of the range of the monopolist.
When did the 10th renter become a property owner?
And anyways, the monopolist doesn't corner the market directly; they use inside information to buy cheap, and have excess capital to take advantage of market opportunities. How many old west movies are premised on some rich guy trying to buy up all the land in town because they know the railroad is coming through? Those are actually based on "true stories." The late 1800s was full of that.
And anyways, the monopolist doesn't corner the market directly; they use inside information to buy cheap, and have excess capital to take advantage of market opportunities. How many old west movies are premised on some rich guy trying to buy up all the land in town because they know the railroad is coming through?
SF is already sold out, so it doesn't apply at all; there is nowhere to build and all the property is spoken for. It might have applied 110 years ago after the great fire, or even in the early 90s after the S&L crisis, but not today.
> This buy-up argument is impossible in a free market.
On the contrary it is an inevitable risk to any commodity that can be monopolized.
The monopolist can make more from the resource because he will be able to charge more than the current owner. Thus he can offer the current owner more in cash than the owner could ever make renting it. If the owner is a rational actor he will always sell out to the monopolist.
In your analogy, the holdout charges $2.50 rent, the monopolist plans to charge $1000. The monopolists borrows 100 years rent and offers it to the holdout who, being rational, sells. The holdout makes more money, the monopolist makes more money. Only the tenant looses.
It is that way with every commodity that can be cornered. That is why we need to enforce anti-trust laws.
In the event the current owner did not sell, the monopolist could use part if his holdings to eliminate his competitor by selling at a loss. So stretching your analogy, he could use rent from distant apartments to offer discounts on those near his competitors until his competitor goes broke.
Let's say there are 10 people renting apartments that a monopolist plans to buy out, and each of their properties are 'worth' $1, meaning you could reasonably expect to pay $10 for one property. They also rent out their appartments for $1 each.
What happens when the monopolist starts buying properties? He buys a few, and they notice he's going for a monopoly. They will raise their prices, because they know it will be worth it for the monopolist to pay $20 or even $30 to aquire their properties.
Let's say, through a miracle, the monopolist endures these exponentially growing raised prices, buys 9 of the 10 properties, and raises rates to $3 to cover the losses he's had to put into buying his last couple of properties.
Well, the 10th would be able to rent his land out at nearly the same price as the monopolist, say $2.50. But notice that the 10th property owner didn't have to over-pay for his land, so he will is making way more profits than monopolist, which would price his property out of the range of the monopolist.