Competition is good for gamers. A lot of the more niche first-party games/moneyhatted games won't exist in your scenario. Sony, Microsoft, and Nintendo have all been arrogant at times and screwed up their platforms. If you have a virtual monopoly you'd probably see that again from any company in charge.
Depends on who ends up on top. Sony saw virtually no competition in Gen5 and Gen6, and yet I'd argue those were easily the best 10 years in console history in terms of software,
particularly in terms of variety the very same "niche/moneyhatted" games you describe. Despite completely dominating the market, Sony took the initiative in publishing those niche games that otherwise may have never seen the light of day due to the startup costs, even though the core design philosophy of the PS1 itself was lowering the cost barriers for developers through optical discs. Sony took the money they were raking in and used it to fund small developers that went otherwise ignored by the likes of EA. You could say the corporate philosophy was, "Share the wealth, and we all get richer."
Of course, you also have companies with different philosophies, like MS. Once they were comfortable with their position in the marketplace with the XB360, they all but abandoned core game development, apart from the money-printers, Halo, Forza, and Gears. They attracted people to the brand by paying lip service to small developers, but once MS had the userbase, they didn't need to waste time with the small-potatoes devs, and could instead invest that money in to DRM research and biometric advertising survey cameras. Their corporate philosophy might be described as, "Hoard the wealth, and we get richer."
Different companies, different philosophies, different behavior. While it may be safe to assume that a
given company will act as you describe once they've achieved market dominance, you can't then assume that
all companies will act in the same fashion. Sony and MS are actually perfect of examples of how two different companies will leverage their dominance in different ways, given the opportunity. Institutions like these don't really change their basic behavior and strategies. There's a reason the very word institution has come to mean something which doesn't change. "Corporate DNA" would be the buzzwordy way of describing it, I suppose.
You mention Arrogant Sony, but their biggest mistake was in designing an $800 console, which was certainly the most badass console around, but it was still a hefty investment. So they sold me my 20GB on launch day for $500, effectively giving me their uber gaming box, and still leaving me $300 to spend on software. So I got $800 worth of hardware, and five free games of my choosing. Maybe as many as a dozen free games, if I spent my pennies wisely. So yeah, fuck you very much, Arrogant Sony. /facepalm
Hardware pricing does bring up another advantage of market dominance that I forgot to mention though; less money wasted on hardware, meaning more money spent on software instead. Let's look at a "competitive" scenario, where you have two equally viable platforms not a bad choice to be made either way. You have a situation where it's a coin toss which platform a given user ends up on, and the more appealing both systems are, the more consumers who will feel compelled to buy both systems.
Let's look at our pool of 100M gamers again. We'll say 5M are Team Green, and will never buy anything but MS, and we have another 5M on Team Blue. With equally viable platforms, you might have 70M more who flip their coin, so you have 40M of each console sold. Then the remaining 20M gamers get both platforms, so they don't miss anything important. So we have 120M pieces of hardware sold, in to a market of only 100M customers. Sounds like a pretty healthy market, right?
Well, let's compare it to dominance. Team Green dutifully buy their 5M XBoxen, and Team Blue their 5M PlayStations. Now we have another 85M who decide PlayStation is the obvious choice, given the price and capabilities of the hardware, and Sony's excellent track record getting games made,
especially when they're dominant. The remaining 5M buy both platforms, so they don't miss anything important. So now we have 105M units sold to our 100M gamers, a 13% contraction in the hardware market. Panic ensues.
Except that's a good thing. The extra 15M units weren't really doing anyone any good. We still have 100M gamers buying games either way. Even the platform holder doesn't benefit, as those units are being sold at cost, or worse. The primary effect of those 15M units is to pull an additional $4.5B (yes,
billion) out of the pockets of gamers. That's $4,500,000,000 that could've been spent on games, but instead it was pissed away on hardware because competition. Tell Bobby Kotick you know how to get people to spend an additional half-billion a year on games and see if he perks up at all.