Barriers to entry: the case of ink jet printers
One way in which oligopolies maintain themselves is in terms of barriers to entry. In a number of specialized industries, the investment in terms of money, time, training, and intellectual property gets raised so high that there's no way that any new company can enter it. That advantage can be compounded by having companies in such industries acquire competitors and their patents and engineers. It is also can strengthen as the advances in research and development are so rapid and complex that the opportunity to enter the market gets ever more remote.
Take, for example, the ink jet printer industry. These printers have many uses, but their use as office machines are diminishing, since faster and cheaper-to-run laser printers, even color ones, are getting more affordable. They are still used for home use, of course. But in one area, they are growing rapidly: the printing of digital photographs.
Manufacturers of film and related chemistry like Kodak and Fuji are not only being battered by digital cameras replacing film, they are losing out as more and more photographs are processed using inks and papers developed by the four big ink jet printer companies. Those four are two Japanese companies - Canon and Epson Seiko - and two US companies - Hewlett-Packard and Lexmark. In the decade since digital cameras became widespread, these companies have developed systems using their printers that can match the quality of traditional photographic (silver halide) prints and can exceed them in terms of image durability.
Even though you can buy quite a good ink jet printer from any of these companies for under $100, the engineering behind them is extensive and costly. Each year sees major improvements from all the vendors and all four have extensive scientific staffs to improve their machines. These involve mechanical tolerances measured in nanometers, extreme speeds and temperatures, constant experimentation with combinations with ink and paper, and a good measure of fluid dynamics, photospectroscopy, and software engineering along with skill in precision manufacturing.
All of this expense and the patents associated with them guarantee that no new companies will enter the ink jet printer market any time soon. The big four compete among themselves, but face (for the moment) no threat from the outside.
The fact is that getting high-quality, long-lasting photo prints from an ink jet printer involves an interdependence of printer, ink, and paper. The big printer companies lose money selling printers, but make it from selling ink cartridges and (secondarily) photo-quality paper. But the big four ink jet makers have faced and are facing lawsuits by ink manufacturers who want to remove mechanical obstacles set up by the printer companies to discourage replacement or refilled cartridges. The physical obstacles (microchips on each cartridge) may be illegal, so the big four are trying something much more difficult, the task of persuading users of the enormous superiority, in terms of color persistence, of their own ink and paper systems over those of rivals. In establishing that argument (a valid one, I believe), all four major manufacturers have a common interest that, to some extent, overrides their rivalry with each other.
1:17:21 PM 
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