Monopoly Abuse

Monopoly Abuse

Copyright: © 2015 |Pages: 13
DOI: 10.4018/978-1-4666-7254-3.ch005
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Abstract

Monopoly is the case when a firm provides products or services to which there is neither competition nor a near substitute, dictating price and quantity produced. Monopolies raise concerns of unethical business practice because they perform acts of conspiracy and collusion. Consumers will be buying needed products at unfair prices and questionable quality standards. The instrumental approach is when a company performs monopolistic behavior in order to maximize company profits and satisfy corporate shareholders. The social approach is when a company seeks the good of the greater environment, looking beyond the benefit of shareholders. Monopolistic behavior may provide certain positive advantages like helping expand different industries, generating a lot of capital into the business cycle, introducing innovation, and bringing a solution to some major economic problems. Disadvantages of monopolies are mal-distribution of the social product, decreased economic national growth, and increased unemployment levels, blocking competitive markets, and lacking socio-economic efficiency. This chapter explores monopolistic abuses.
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Background Of Monopoly Power

Economist William Hutt once stated “Political liberty, can survive only within an effective competitive economic system” (Hutt, 1936). Those words remain pillars for economic idealism. However, the business world we live in today is far from idealistic. When a certain firm dominates a sector in the market, it gives birth to a monopolistic face of the market. In the case of a monopoly, a firm would provide products or services to which there is neither a competition nor a near substitute, dictating price and quantity produced. It controls how much consumers sacrifice in order to obtain the monopolized product or service. That is, consumers can find no alternative to the monopolistic firm since none exist. According to Hutt, “the enemy of democracy is a monopoly in all of its forms: gigantic corporations, trade associations and other agencies for price control” (Hutt, 1936). It is important to note that a monopoly can never have unlimited power, because of governmental pressure. Governments have taken precautions and counter actions to fight the negative effects of monopolies, especially after the Great Depression of 1929. Though such actions do not terminate monopolies, they do somehow place controlling limits over them.

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