I&#x27;m not sure I buy this because even if a third competitor entered and claimed nearly half of the market, the people far out in the tail of that claimed half would not experience any improvement in service. To them, they would be nearly just as bad off. Their relative position wouldn&#x27;t improve unless many, many entrants just kept repeating the exact same formula, which is highly speculative because the market could become saturated long before a chain of entrants is built up to such a degree as to effect the people in the tails in any meaningful way<p>It&#x27;s also worth mentioning that in most real life scenarios, the risk of a cabal is incredibly high. Without regulation, what stops the first two market participants from using wealth created during their duopoly phase to &quot;buy out&quot; the third entrant, and then all three buy out the fourth, and so on? Each new entrant would have to value the discounted future stream of returns from their market share at something higher than the buyout, which again is really speculative.<p>I understand that regulations present their own problems: what stops the duopoly from purchasing regulatory capture and raising barriers to entry?<p>I&#x27;m just saying I don&#x27;t think for a second that any quick and simple &quot;but low barriers to market entry would solve this&quot; thinking is even slightly convincing here. The Hotelling problem does really present a significant problem to natural equilibria that free markets arrive at, at least from a social welfare optimization point of view. It doesn&#x27;t mean any given proposed regulation is the &quot;right&quot; answer, but it also doesn&#x27;t do anything to build assurance that <i>less</i> regulation is acceptable either.