Effects of Monopoly?

Question

I'm looking for some information regarding monopoly. (not the board game lol). I have an essay and need to explain under what circumstances, if any, could consumers benefit from monopoly.

Does anybody know of any site with this kind of info?

Thanks

Answer 1

There are a few types. Government monopolies like utilities, quasi monopolies like ATT up until the break up, and true monopolies like standard oil or microsoft. Boeing was close to a monopoly until Airbus was formed, which by the way is government backed company.
Consumers would benefit from a monoply when without it they would not recieve any of that service. Say for example an airline service for a small country in the 1960s. Because the start up cost is high and the business risk is high, no company would enter the market without the ability to charge high rates, ie monoploy power.
ITT in Chile might be an example, they had a monoply and were able to build out Chile's phone system more quickly and with better quality than other South American countries.

Answer 2

Well, Monopoly's can control prices since they are the only firm. If they choose to, they can lower them for their customers. Also, monopoly's have a differentiated product base, offering many different kinds of products to its customers. Consumers do not have to worry about price gouging and shady behaviors constantly associated with competitors since monopoly's are a single firm industry. But, the best example has already occurred. Consumers benefited with Microsoft because they received applications free with Windows that they would have had to purchase if they didn't have it. I am not saying that they are acceptable, only some positives if monopolys were allowed under some circumstances. A site that shows some of this is: Thank you...

Answer 3

There are two primary benefits to a monopoly.

The first is less obvious, but sometimes there are natural monopolies, where the required scale for efficiency is greater than the population of buyers. The cost of scale operations is the least for a single large producer than it would be for hundreds or thousands of small ones. It used to be, and may still be true, that the market for refrigerators in Canada is a natural monopoly. Competition in that market could add no value because the market is smaller than the minimum level of scale for economic efficiency.

The second is more common and that is where you have easily copied technologies that would not be invented if they were not granted patent protection. It costs the public far more than if the technologies could be copied, except that there would be no economic incentive to develop the technology in the first place. For example, only 1 in 100 drug research projects result in a usable drug and they are very long lived projects as well. One recent drug began its project during the Eisenhower Administration. These are very long very slow processes that would have no chance of being invested in if the promise of monopoly were not granted a priori. In competition, these drugs would fall in price to their variable costs, which are trivial, choking off R&D entirely.

These are extremely low risk projects in the sense that failure is almost a guaranteed outcome. Any one of these is a near certain failure. Without the guarantee of not only cost recovery but also cost recovery on the failed projects as well as a suitable return on equity for the failures, medical research would grind to a halt.