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  • Print publication year: 2010
  • Online publication date: June 2012

10 - Monopoly power and firm pricing decisions

from Book III - Competitive and monopoly market structures

Summary

If monopoly persists, monopoly will always sit at the helm of government … its bigness is an unwholesome inflation created by privileges and exemptions which it ought not to enjoy. If there are men in this country big enough to own the government of the United States, they are going to own it.

Woodrow Wilson

That competition is a virtue, at least as far as enterprises are concerned, has been a basic article of faith in the American Tradition, and a vigorous antitrust policy has long been regarded as both beneficial and necessary, not only to extend competitive forces into new regions but also to preserve them where they may be flourishing at the moment.

G. Warren Nutter and Henry Alder Einhorn

At the bottom of almost all arguments against the free market is a deep-seated concern about the distorting (some would say corrupting) influence of monopolies. People who are suspicious of the free market fear that too many producers are unchecked by the forces of competition, but instead hold considerable monopoly power or control over market outcomes. Unless the government intervenes, these firms are likely to exploit their power for their own selfish benefit. This theme has been fundamental to the writings of economist John Kenneth Galbraith:

The initiative in deciding what is produced comes not from the sovereign consumer who, through the market, issues instructions that bend the productive mechanism to his or her ultimate will. Rather it comes from the great producing organization that reaches forward to control the markets that it is presumed to serve and, beyond, to bend the customers to its needs.

(Galbraith 1967, 6)

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