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The role of market concentration in economics and the impact of a high concentration ratio on consumers belong to the number of widely discussed questions. The author of the article “Market Concentration Can Benefit Consumers, but Needs Scrutiny” reflects on the various consequences for consumers that exist due to high market concentration and growing market power. Among them are markups on products and services that become more uncontrolled and less strict customer service standards. The article reveals the negative side of market concentration, associating it with growing prices and customers’ powerlessness. The first important point touched upon in the source under analysis refers to the growth of monopolies and how it impacts customer behavior and satisfaction. As is clear from the researcher’s arguments, growing monopolies are not always associated with setting artificially high prices due to the absence of competitors (“Market Concentration Can Benefit Consumers, but Needs Scrutiny” 2017). However, providing the data on rising markups on products and services offered by companies in the United States, the author conducts a more objective analysis of the situation with market power.
The existence of benefits for consumers due to growing monopolies is a point at issue. Many researchers see growing market power as a barrier to product diversification (Heger and Zaby 2018). That possessing monopoly power has an opportunity to implement their own price-formation principles and the objectives. The price-fixing pursues nothing to do with increasing quality-to-price ratios of products (Hosoya and Kaneko 2015). It is doubtful that common people who value affordable prices and innovative technology can benefit from the monopolization of markets. It has been well said that monopolies are a fomenting ground for crime (Hogan 2016). Against the background of low competition, growing market power provides giant producers with an opportunity to dramatically increase their profits by setting higher prices and implementing the strategy of planned obsolescence. 2 The negative impact that market concentration and growing market power can have on ultimate consumers also relates to the role of consumers in price-setting.
In a monopolized market, customers’ ability to impact the process of price determination is decreased. As is stated in the newspaper article under analysis, price growth in tech markets is attributed to product personalization costs. In addition to that, the author notes that an increasing market share is similar to an excellence award. The stories of many famous products illustrate these principles and show that monopolization deprives people of an opportunity to impact price formation. For instance, well-known products offered by Apple cannot be substituted by other devices due to the unique range of functions that they have. A lack of financial and technology resources deprives other companies in the field of an opportunity to develop something as good. Being attracted by the company’s social image and an innovative approach to product development, consumers with sufficient incomes continue buying Apple products as they face a Hobson’s choice (Clarke and Boersma 2017). Increased demand for such devices allows for raising prices. So long as there are enough customers who can afford them, those with medium incomes have a limited opportunity to change prices to make them more adequate to production costs (Aulakh 2018). To sum it up, the article provides a thorough discussion of consequences for customers associated with an increase in the largest companies’ market share. The arguments indicate that market power involves price growth, which is not favorable from the consumers’ perspective. Also, the discussion of technology giants (these “endless circles” where customers do not really impact prices) presents many felicitous remarks.
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