Does a truly free market inevitably create monopolies or not?

Question

Also is there any objective proof for one or the other?

Answer 1

No monopolies are not created by free markets. Free markets wouldn't prevent a monopoly from existing but they would prevent it from raising prices. Walmart for example has grown at a rapid rate and is the largest retailer. However, their prices are very competitive.

The only real monopolies are those that are created by government. Examples like your local electrical utility the phone company, and your natural gas utility. Some cities allow monopolies to exist such as cab companies and cable television companies. That is not free enterprize.

Answer 2

It depends on the cost structure. In a decreasing-cost industry, where marginal costs decline with increasing volumes, free market creates monopolies, because the competitor who produces the largest volume can sell the cheapest and price the competition out of the market. In an increasing-cost industry, where marginal costs rise with increasing volumes, free market results in a perfect competition.

But quite a few of today's markets are not free. When Alfred Marshall coined the term "free market," he assumed that limitations on market entry can only be artificial. In 1890, when Marshall's work was published, this view had some validity to it. Since then, we have come to realize that there are natural barriers to entry, such as capital requirements. So when that happens, the market usually ends up being an oligopoly.

Finally, all of the above assumes that the good is homogenous (i.e., cannot be differentiated). It it can, we get into a whole new game called monopolistic competition...

Answer 3

There are natural monopolies which exist with or without free markets. Other than these, it depends on what you consider a free market. If you mean one without government rules on business practices, the answer is yes you will get monopolies. We know from the past (late 1800's in US) that without government enforced rules, large national companies can drive small companies out of business in local markets, then raise prices to finance the next local take over until they have a monopoly. If you mean competitive markets were companies operate like economic theory predicts they should, there will probably not be long lasting monopolies. I doubt that Microsoft will still be the dominate company in 20 years.

Answer 4

It doesn't inevitably because fortunately free market allows competition and common to popular belief. A big company like Walmart cannot just buy out another store by building right next to them, its against the law, there must be a certain distance. It is regulations like these that are used to prevent monopolies.

Answer 5

I don't think it's probable, but it is possible. Keep in mind that a monopoly in a global marketplace would probably require so many resources as to render the firm ineffecient. It can result in dominant players though i.e. Microsoft, Coke, Disney.

Answer 6

loose markets carry about "corporatism" in reality especially methods. One is that if the amenities or products is one so powerful in that the technological part is there or if the product is considered a celebration of a few thing the rustic needs to become responsive to with. Then authorities presented subsidies to save the markets reliable for the product and the choose severe and exported it and denied any similar productts get admission to in to the rustic. yet another celebration is even as the corporation forges adequate clout as to educate its value by campaigning for the product and providing marketing campaign monies to both activities to end value lists hostile to it or to minimize taxes. Or the product will become aside of the nationwide protection.