system
Given the following post, respond as if you're commenting on Reddit:
human
How come there is such huge wealth inequality even in competitive markets?

Jeff Bezos has a net worth of $166.4 billion. The CEO of McDonald's in the US earns 3000x what the median McDonald's worker earns. But both Amazon and McDonald's operate in a competitive market. The neoclassical doctrine on both perfect and imperfect competition states that economic profit is incompatible with competition (so in the case of monopolistic competition as in these examples, new competitors join the market until economic profit is down to zero). But both Amazon and McDonald's are subject to monopolistic competition and yet here we are. Obviously you could say that these huge incomes are just the salaries of the CEOs, not profit. But paying your CEO such a huge amount is not a true cost of doing business, the fact that these companies are able to do so flies in the face of the neoclassical view of competition that competing firms are only just able to stay in business. Exactly how reliable the "1% own 50% of the world's wealth" claim is aside, it's very telling. How are we supposed to reconcile this with the neoclassical doctrine on competition?
gpt
The modern neoclassical view is not that all firms are, in fact, perfectly competitive. While the firms you named have competition they do indeed (likely) have pricing power as a source of profitability.

Another thing that’s important is that economic profits being zero doesn’t imply that accounting profits are zero. Economic profit includes opportunity costs: If many firms are profitable, “zero profits” just implies the equalization of accounting profits across markets/industries, not zero accounting profits in every industry per se.

Finally, even in perfect competition, some firms can make profits in partial equilibrium if they enjoy a cost advantage over others. (Eg when you have upward sloping supply curves, some firm is making variable profit!)