Error by Omission or Maybe Something Else

Against free market, Kwik Kian Gie wrote:

Because anything goes without government regulation, she (the producer) starts to conduct competitive strategy that kills her competitors through dirty practice, supported by her wealth. For example, she sells her products at price below cost of production. She would suffer loss, but she can bear it, thanks to her already accumulated wealth. At such price, all competitors would lose and go bankrupt. Except she, who has the largest capital. After the competitors go bankrupt, with her monopoly power, she increases her product's price very steeply.

Let me restate my take on predatory pricing: as long as there is no government regulation discriminating other producers, I don't see it as a problem --or dirty practice. And letting the market work will set the price back at producer's normal profit level. But you can not see that in Kwik's story because it was not yet finished and the next part of the story was omitted either by error or incomprehension.

Why?

The supernormal profit from after-predatory pricing monopoly power will attract the old producers and new producers to enter the market, as long as there is no government restriction. This will keep the price down again.

Also, any monopolist is subject to the consumer's demand -if you look at demand function in a monopolistic market, it's downward sloping. Thus, first, charging higher price means lower quantity demanded. Second, consumers do not solely look at a single product, she will always take into account the substitutes. For instance, if the price of espresso goes crazy, even a coffee freak like me will switch to teh botol. As a result, the predator needs to consider a whole arrays of competitors.

Where do I get this idea from? Econ 101 textbook. And by the way, the textbook always states that what matters for economic agent's decision is the marginal cost and marginal revenue (or benefit), not accumulated wealth.

Your baristas talked about this misleading op-ed during the break, and perhaps Ap will join me to serve you his comment.