By Ryan Franda
Think about the
board game Monopoly. As you first start
purchasing property, the rent you can charge is negligible compared to the cost
of the property. However, get all three of
the same color, and you have a monopoly.
If a hypothetical costumer needs to room at light blue, and you own
every light blue property, they have no choice but to stay with you. With this power you can ratchet the prices up
with houses and hotels. You have
complete power over the consumer. During
the progressive era, Theodore Roosevelt dramatically changed the role of our
government in the economy by passing anti-trust legislation. Starting with the Sherman Anti-trust act of
1890, Roosevelt was essentially working to end the dominance of Pure Monopolies
over the consumer. In general, his
efforts have been viewed as positive influences on the good of the American
consumer. However, with the diverse and
highly competitive nature of today’s economy, do we still need to regulate
businesses in this manner? Is competition really a necessary part of every
industry? Sometimes, yes – but not always.
In 1998,
Microsoft Corporation was accused of violating the Sherman Anti-Trust act. Not only did they control about 90% of the
industry, but they also bundled in their web browser with their software,
essentially destroying any other web browser developer. In 2001, the verdict was decided. Microsoft had to release part of their code
to a third party to make sure that their software wasn’t preventing other web
browsers from being downloaded onto their computers. Other than that, they were allowed to
maintain their chokehold on the operating system market.
Why allow one
company to dominate this market? Isn’t it unfair to any other potential
software developers? Actually,
Microsoft’s monopoly doesn’t seem to be hurting the consumer too much. The demand for their software is such that
millions of consumers are still willing to pay the inflated prices for
Microsoft operating systems. In
addition, breaking Microsoft up to increase competition may not have the
desired effect for the consumer. The
enormous size of Microsoft allows them to take advantage of economies of
scale. Mass production, specialization of
labor, and the use of professional efficiency experts all contribute to a lower
production cost, and in turn a lower cost for the consumer. But wouldn’t introducing more companies to
the field cause Microsoft to lower their prices to compete? Not
necessarily. Monopolies often keep their
prices low in order to discourage competition from entering. A brand-new software company would not be
able to take advantage of the economies of scale like Microsoft does, and would
not be able to compete with their prices.
Therefore, there are no real barriers of entry besides competition itself
– which is a natural part of a capitalistic society in itself.
Obviously, we
still need some safeguards to prevent companies from abusing a monopolistic
situation and forcing consumers to pay ridiculous amounts of money for their
product. But in general, if a
monopolistic company is meeting consumer needs, we shouldn’t force competition
into the industry. Take Luxottica for
example. They make a variety of eye wear
and distribute it at a price consumers are willing to pay. Maybe they are crushing the lifelong dream of
some budding entrepreneur who has always longed to start his own glasses
company. However, apart from this one
hopeless case, the company pleases everybody, from themselves to their hundreds
of millions of consumers. Teddy
Roosevelt may have taken some important steps in consumer protection, but any
further intervention would be disadvantageous for both producer and consumer.
For more information on the
possible benefit of monopolies, watch the youtube video in the first link. The second link is a humorous article from
cracked.com [BLOCKED BY SCHOOL'S WEBSITE FILTERING SOFTWARE] with some examples of everyday monopolies, further proving that
monopolistic conditions don’t always hurt the consumer.
http://www.cracked.com/article_18845_6-secret-monopolies-you-didnt-know-run-world_p2.html [BLOCKED BY SCHOOL'S WEBSITE FILTERING SOFTWARE]
Bibliography
"Luxottica."
Wikipedia. Wikimedia Foundation, 27 Oct. 2013. Web. 3 Nov. 2013.
<http://en.wikipedia.org/wiki/Luxottica>.
"ThisNation.com--Is
Microsoft a monopoly? If so, why does it matter?." ThisNation.com--Is
Microsoft a monopoly? If so, why does it matter?. N.p., 3 Nov. 2013. Web. 3
Nov. 2013. <http://www.thisnation.com/question/027.html>.
"United
States v. Microsoft Corp.." Wikipedia.
Wikimedia Foundation, n.d. Web. 3 Nov. 2013.
<http://en.wikipedia.org/wiki/United_States_v._Microsoft_Corp.#Settlement>.
I agree. While many people view monopolies as a dangerous force in the economic market, oftentimes, their interests align with the consumers. This allows them to take advantages of the size of their company. (as mentioned in the article) However, I believe that Microsoft did this because they aren't selling an essential product. If someone had gained control over a essential market such as the food market, people would be forced to buy from them in order to survive.
ReplyDeleteI disagree. I don't think many people who understand monopolistic characteristics find it as a "dangerous force" or "threat" to a specific market in the economy (as many monopolies are very influential contributors to the National GDP). It simply discourages people and their businesses from entering a certain market, which doesn't necessarily effect the national economy. Also monopolies are very rare in today's economy as other large companies have managed to grow to a point where they can compete (Apple to Microsoft, Bing to Google, etc.). On top of that, these massive corporations employ thousands of people therefore increasing the GDP and decreasing the unemployment. So in short, monopolies (that are rare in today's economy) don't have a massive deficit on the economy, and, them and their competitors alike, employ thousands of people, therefore helping the economy rather than anything else.
ReplyDeleteI think that monopolies should be illegal because clearly in the past especially with the railroads. That's why the government should put a stop to it. Between horizontal and vertical integration monopolies have total control over their respective markets and our economy as a whole. They can charge whatever price they want because there is no competition to bring price down. This hurts us all as participants in the economy
ReplyDelete