The question of the upside and downside of a monopoly has been around a good 200 years.
They still ask that question, yet monopolies still exist, still flourish and still have their supporters and detractors.
First off – what’s a monopoly?
A monopoly (from Greek μόνος, mónos, ‘single, alone’ and πωλεῖν, pōleîn, ‘to sell’) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic competition to produce a particular thing, a lack of viable substitute goods, and the possibility of a high price well above the seller’s marginal cost that leads to a high monopoly profit. The verb monopolise or monopolize refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge overly high prices, which is associated with unfair price raises. Although they may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).
A monopoly may also have monopsony control of a sector of a market. A monopsony is a market situation in which there is only one buyer. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations in which one or a few entities have market power and therefore interact with their customers (monopoly or oligopoly), or suppliers (monopsony) in ways that distort the market.
They can be formed by mergers and integrations, form naturally, or be established by a government. In many jurisdictions, competition laws restrict them due to government concerns over potential adverse effects. Holding a dominant position or a monopoly in a market is often not illegal in itself; however, certain categories of behavior can be considered abusive and therefore incur legal sanctions when business is dominant. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic interest group. Patents, copyrights, and trademarks are sometimes used as examples of government-granted monopolies. The government may also reserve the venture for itself, thus forming a government monopoly, for example with a state-owned company.
Thanks Wikipedia.
Supporters swear monopolies are good for the economy because they bring prices of goods down, because one company or corporation controls just about all aspects of products or goods that company offers and therefore those products would be naturally cheaper.
Then there are those who swear they are bad because is kills competition which is something our Free Enterprise system and Capitalism is based on. If one company controls everything, that one company can dictate the cost of a given product – in essence, they can charge how much or how little they want, because one entity controls the market.
Monopolies are different than they were in 1946, the year of this broadcast – corporate mergers were rare – corporate takeovers even rarer. In 1946 there were laws protecting American business and the consumer from unfair pricing, potentially taking advantage of a monopoly to falsely jack-up prices. But in the 1980s those regulations and laws preventing such a thing happening were eliminated and companies were free to merge, takeover and build empires solely to corner a market and eliminate competition.
This broadcast from the series Wake Up, America! in 1946 posed the question to two economists if the concept of a monopoly was a good one or a bad one. The end result was fireworks.
A half-hour shouting match ensued and threatened to derail the entire program at several points during the broadcast.
It’s the same way now.
Have a listen.
