Monopolies Essay

3526 Words 15 Pages

What is a monopoly? According to Webster's dictionary, a monopoly is "the exclusive control of a commodity or service in a given market.” Such power in the hands of a few is harmful to the public and individuals because it minimizes, if not eliminates normal competition in a given market and creates undesirable price controls. This, in turn, undermines individual enterprise and causes markets to crumble. In this paper, we will present several aspects of monopolies, including unfair competition, price control, and horizontal, vertical, and conglomerate mergers.

Unfair Competition

Barriers to Entry. In general, a monopoly by one company possesses the power to create barriers to entry for competing companies in a
…show more content…
They have obtained civil consent decrees that will contribute to lower prices and improved quality for such products. In addition, they have also worked with businesses to restructure mergers in order to protect competition in the American marketplace.

Predatory Pricing

Predatory pricing is a tool that is used to achieve market power. It is the practice of pricing below cost. This can foster market power in three simple ways, by eliminating rivals, by disciplining rivals who refuse to cooperate in keeping prices at monopoly levels, or by depressing the market value of rivals' assets so that a predator can purchase these assets at below market prices. Predatory pricing does not allow the market to work freely. It is a way of controlling the market.

Conglomerate Mergers

There are three broad types of mergers: horizontal, vertical, and conglomerate. As the antitrust laws made Horizontal and Vertical Mergers more difficult, Conglomerate Mergers became more popular and are very common today.

Conglomerate Merger - is the merger of firms in unrelated industries. If Coca-Cola mergers with a movie producer, that would be a Conglomerate Merger.

An additional reason Conglomerate Mergers became popular is the view that the business cycle affects different industries at different times. Thus, a firm with operations in many different industries would have some divisions expanding when other divisions were

More about Monopolies Essay

Open Document