Monopolies Monopolies

MONOPOLIES 3

Monopolies

Monopolies

Accordingto Simpson (2010), monopolies arise through two major processes. Inthe first process, a firm gains monopoly power naturally withoutgetting involved much in the process. This happens when the firmbecomes the only firm in the industry. Another process through whichmonopoly power is gained is when the government restricts competitionin a given line of products or services to allow a single or a groupof firms to thrive. For a monopoly power to exist in either process,there are certain optimal conditions that must prevail. Theseconditions are that there must be a high demand for a product, whichhas no close substitutes (Simpson, 2010).

Theantitrust law has failed hugely in its purpose of preventing firmsfrom monopolizing markets and using anticompetitive tactics to putother firms out of the market. The law has failed because it has notbeen applied rigidly or consistently over the years. In some cases,the Supreme court has applied very strict measures on firms sued ofmonopolizing markets while, in some cases, it has been very soft.Additionally, the law has also received different interpretationsfrom various professionals. As such, there are firms that aremonopolies but are not considered as such by the Supreme Court.Important cases that reveal inconsistency in application anddifference in interpretation include the 1911 StandardOil case and the1920 U.S.Steel case (Kaysen,&amp Turner, 1959Kovacic,&amp Shapiro, 2000)

Preventingmonopolies is always good, especially in current times when startupsare many, people are seeking self-employment, and consumers want morefreedom. Monopolies kill start-ups, deny consumers variety, dictateprices, and manipulate markets. Competition promotes consumerwell-being and is advocated for internationally (Stucke, 2008).

References

Kaysen,C., &amp Turner, D. F. (1959). Antitrustpolicy: An economic and legal analysis(No. 7). Harvard University Press.

Kovacic,W. E., &amp Shapiro, C. (2000). Antitrust policy: a century ofeconomic and legal thinking

Simpson,B. P. (2010). Two Theories of Monopoly and Competition: Implicationsand Applications. TheJournal of Applied Business and Economics,7(4),139-151.

Stucke,M. E. (2008). Better competition advocacy. St.John`s Law Review,82(3).