A monopoly is a market structure where there is only one supplier or provider(Steinbaum, 2022). The second reason to indicate why they have a wide effect on producers or sellers is the fact that this one supplier can completely dominate the whole supply market. In these circumstances, the monopolies are liberal in fixing their prices and marginal levels of output as long as the rivals are not present. Nevertheless, monopolies can be the outcome of natural circumstances, such as economies of efficiency, better innovation, or better production. Nonetheless, the existence of an illegal monopoly turns out to be a result of anticompetitive practices, which ultimately lead to lower consumer well-being and lessen the efficiency of the market. The objective of the study is multi-pronged; specifically, the study will investigate the basis of this unlawfulness, followed by a differentiation between monopoly and competition.
The monopoly comes into being when one firm occupies a large portion of the market in relation to a certain product or service to the point where it is the sole supplier in the industry. The long arm of this monopolistic power gives the firm control of prices and output. It follows that there will be limited visitors to the market due to the adoption of higher prices and limited choices. Monopolies can occur for any reason in the business setting. They might be limited by various constraints like economies of scale, having needed resources, legislation, or technical superiority. No matter what the cause of formation, the fact is that monopolists are able to control and influence macroeconomic outcomes in every way — they substitute competition and introduce barriers to innovation; they can batter the trust of the market as a whole.
A number of prominent characteristics are what define a monopoly from a competitive market. On the other side of the equation, the associations are pushed down on the demand curve due to the demand curve with the introduction of a downward-sloping demand curve. In theory, the market structure in which firms behave as price takers is the competitive market; for that reason, the monopolist would be a price setter by nature; thus, they would set prices to maximize profit margins. Another frequent approach among them is hindering the entry of new firms into the market and thus blocking the access of the big companies that are already operating and pose tough competition. These barriers manifest in the face of patents, exclusive use of resources, or high capital costs. After that, monopolies usually reassign the resources to price-unrelated targets. In other words, because there is no competitive pressure on those firms to reduce costs and innovate, they reassign the resources to other purposes.
Therefore, the matter is not the point in all monopolies creating illegal activity, but rather who from the monopolists are those that carry out the lawful practices. A considerable boundary, which can be defined for the detrimental monopoly as the dominance in the market, is among the factors that have a great role here. Market power is the mechanism of a firm or a group of firms holding together that can affect prices and handle output, thus hurting the consumers. The market power is carried out by regulators depending on factors such as the proportion of the market, potential obstacles in the beginning, and competitiveness. If a firm does not follow ethical customer treatment standards by resorting to anticompetitive approaches, such an act may be characterized as a violation of other firms’ rights.
Sketching, the most commonly used arsenal of illegal monopolies’ actions, is the component of anticompetitive and deceitful actions that are used on opponents and aimed to either keep competitors away or maintain their leadership. A favorite way to reach this goal is predatory pricing, which implies that the prices laid and market prices are closer to production costs than to the market prices to push the rivals out of the market. In addition to the omnipresent exclusive dealing tactic, the monopolist can come up with yet another one, which is agreements with suppliers or distributors regarding access to the essential inputs or the distribution channels that are limited to competing. These businesses also may make use of ties contracts in which consumers are forced to buy prodded-on or unwanted goods along with something that they desire. The recognition and application of these practices may be regarded as a regulatory measure in the context of antitrust regulation and policy, especially since the short-term consequence may result in further loss of competitors, consequently throwing the prices beyond the normal level, less innovation, and overall consumer welfare.
Antitrust laws are the main source of regulation in the elimination of monopoly abuses as well as combating the formation of monopolies(Flew et al., 2022). The legal roots of the antitrust policy in the United States lie in these two laws: the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914. These laws are known for first restricting marketplace disruption into the competition and then mentioning that dominant behavior like price-fixing, allocation of a certain market, and monopolization are not allowed. The FTC (Federal Trade Commission) and the DOJ (Department of Justice) are the units that investigate the issues related to antitrust and can file legal action against dishonest people in terms of this specific law. The same legal principles and judicial practices thus guide the relationship between monopolies and antitrust enforcement regulation to a greater extent.
In conclusion, a monopoly is a market structure in which a single firm has substantially disproportionate control over the price and output in the market. Natural monopolies and illegal monopolies occupy both hands of the balancing scale. At the same time, anticompetitive behavior that threatens consumer welfare and harmful effects on the market that resist or hinder its transparency and efficiency are the negative factors on its other side. Whether the dominance is considered to be a monopoly or not relies on different factors, including market power, entry barriers, and the firm’s anticompetitive behavior. Investigation, antitrust deliverance, and enforcement of competition laws are regulators’ goals, which result in more competition, innovations, and economic efficiency through the elimination of the negative consequences of monopoly.
References
Flew, T., Thomas, J., & Holt, J. (2022). The SAGE Handbook of the Digital Media Economy. Www.torrossa.com, 1–100.
Steinbaum, M. (2022). We are establishing Market and Monopoly Power in Tech Platform Antitrust Cases: the Antitrust Bulletin, 0003603X2110669.
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