Category: Monopoly

Forces Shaping the DADT Policy

The problem of systematic oppression and marginalization of members of the LGBT community has been in existence in the United States for a significant amount of time, making its way into a range of domains, the military is one of the key areas. Therefore, by lifting the ban on homosexual people being in the military, Barak Obama made a massive breakthrough in the relationships between gay and straight people in American society. When considering the forces behind the change, one must mention the propensity in the society toward building diversity-oriented social justice. The influence of political changes, particularly, the reinforcement of the Liberal Partys principles, can be considered as the driving force behind the alterations that the U.S. society underwent at the time.

Social Values and the Implementation of Policy Changes

The observed phenomenon owes its existence to the notion defined by Parry (2012) as the tribal psychology of politics. Particularly, the propensity among the members of a particular society to follow the principles of justice set and supported by the majority provide the foundation for a massive change in peoples perception of homosexuality, societal taboos, morality, and the role of complying with moral standards.

Additional Examples of Social Values

As the results of a quiz offered by the Moral Foundation (2018) show, most Conservative respondents indicated that they valued morality and compliance with societal standards as high as justice, prevention of harm to others, fairness, and other essential notions that allow providing people with their irrefutable rights (Parry, 2012). Therefore, it can be assumed that the changes in the political landscape of the state served as the basis for enhancing the principles of acceptance within the state (Moral Foundation, 2018). It could be argued that the specified changes were reciprocal and that the results of the elections that allowed Liberals to become the majority were the effect of a shift in social values. Nevertheless, the specified case is a prime example of political factors defining the development of societal relationships.

Monopoly and Government Interventions

When considering the effects of monopoly on the present-day market environment, one must admit that the specified force cannot be described as strictly negative or positive. Instead, it provides a mixed effect that can be used for different purposes, including the encouragement of economic growth.

In addition, one must keep in mind that the modern global market does not contain the specimens of what can be termed as a pure monopoly. The absence thereof can be explained by the rise in product diversity and the increase in opportunities that companies can pursue in the global economy. The resulting emergence of numerous organizations operating in the same niche as corporate giants creates little to no room for absolute monopoly.

However, monopolies also set high-quality standards for the products and services that they deliver. Therefore, opportunities for improving the state economy and promoting active development can be built. The emphasis on the R&D processes and waste management will encourage new entrants in the global market to explore their potential and locate innovative decisions that will make them stay afloat even in the realm of increasingly high competition.

Therefore, introducing tools for governmental regulation of the global market does not seem a sensible idea. Because of the inability to embrace the nuances that guide decision-making processes in the specified environment, governments will fail to create the setting in which organizations will be able to function. Although basic supervision is crucial to ensure the legitimacy of market transactions, rigid control should not be introduced since it will hamper economic growth.

References

Moral Foundation. (2018). Moral foundations questionnaire. Web.

Parry, M. (2012). Jonathan Haidt decodes the tribal psychology of politics. Chronicle of Higher Education, 58(22), B6.

In the United States Congress, the Sherman Antitrust Act of 1890 was the first statute to outlaw trusts. When many companies investors agreed to transfer their interests to a single set of trustees, a trust was formed. The Sherman Act empowered the government to dissolve trusts through legal action. This paper aims to discuss how intellectual property laws dont contradict the Sherman antitrust act of 1890.

The Sherman Antitrust Act was enacted to Congress constitutional authority to control interstate commerce. Courts have made it clear that a firm cannot use a legal monopoly in one market. For example, if a market lacks a better product or commercial acumen, an intellectual property right might be used to gain trust in that market (Sawyer, 2019). Second, monopolists are prohibited from engaging in activity that reduces customer welfare. Firms are banned, for example, from linking a protected product to a non-protected product to extend their intellectual property rights.

Antitrust law also opposes monopolization attempts in a protected products aftermarket. Antitrust theorists are also working on a nonprice predation theory, in which a monopolistic firms efforts to raise its rivals expenses would be a breach of antitrust laws. A corporation may achieve exclusionary market dominance and hence the ability to raise prices, harming consumer welfare by participating in such behavior. Intellectual property law has evolved several measures that supplement antitrust initiatives to combat intellectual property rights misuse (Sawyer, 2019). Conclusively, exaggerated conceptions of the power granted by IP rights and anticipated dangers to competition abound in the history of antitrust action involving intellectual property. As a result, there have been challenges in antitrust cases involving IP tactics where none previously existed. To be sure, striking the correct balance between maintaining competition and incentivizing innovation is not simple.

Reference

Sawyer, L. P. (2019). US Antitrust Law and Policy in Historical Perspective. Harvard Business School. Web.

Business Leaders

At the beginning of the 20^th century, the majority of large industries were controlled by millionaire families, such as the Rockefellers, the Carnegies, and the Vanderbilts. These families were able to develop monopolies that allowed them to benefit from eliminating smaller competitors and remaining on top of the market. Evidently, this turned most of these millionaire families into shrewd businessmen who exploited other peoples labor to attain personal objectives (Surdam, 2020). The increasing prevalence of corruption, racial prejudices, and inappropriate employee treatment was hideous and put employers exploitation trends on display. The lack of responsibility later turned some of the millionaire families into robber barons due to their unprincipled willingness to earn more money. From extremely low payments to child labor, these market leaders would side with any given strategy allowing them to maximize profits (Mitchell, 2020). Thus, factory workers were not treated as humans since there was no proper labor rights movement at the moment.

Pullman Strike: Exploitation of Workers Explained

The Pullman strike occurred due to the workers willingness to fight for increased wages and improved working conditions. Hundreds of thousands of employees were dissatisfied with how the management treated them. The strike became so aggressive that federal troops had to be sent in order to break it up and arrest the leaders of the movement (German, 2022). The primary reason for the employees to go on a strike was a staggering decline in working conditions paired with an unchanging wage that was not enough to cover lifestyle expenses and rent payments. Such inappropriate actions by the management have led to almost 40 people being killed during the strike. The Pullman factory scenario is a textbook example of workplace exploitation (Papke, 2019). Consistent efforts exerted by strikers allowed them to generate reasonable change and contribute to the development of the socialist movement across the US. The nationwide effect of the Pullman strike was also fundamental for an improved understanding of how employees could fight for their rights.

American Working Condition Reforms

A thorough discussion on American reforms in the field of working conditions has to begin with the transformation of the structure of local workplaces. It means that the legislative amendments released throughout the 20^th century created new jobs for multiple populations while also affecting the existing working conditions (Page & Gilens, 2020). Owing to the reviewed legislation, the government was able to remove child labor from the map and prohibit it effectively. It allowed children to get an education and find jobs that resonated with their skillsets. There were numerous movements that reduced the prevalence of gender-based inequities and allowed more women to find high-paying jobs. During the second half of the 20^th century, an increasing number of workplaces began moving toward environments where racial discrimination would not be tolerated (Rahman & Thelen, 2019). Each of these reforms has made the US workplace safer than before, making it possible for employers to unite efforts with workers on the way to transforming labor legislation.

Federal Regulations of Monopolies

The primary reason why the federal government engages in monopoly regulation is the need to prevent excessive pricing strategies from overpowering the market. If there were no federal policies on monopoly, larger companies would be able to outrun the competitive equilibrium and set prices that are above it. According to Feldman et al. (2021), such initiatives damage consumer welfare and lead to long-term allocative inefficiency. The existence of monopolies enforces the deployment of federal policies because, otherwise, service quality would deteriorate in the absence of reasonable alternatives. The increasing risk of monopsony power represents another reason why federal policies are deployed in an attempt to hold back monopolistic behaviors. For instance, profit margins can be squeezed by monopolist companies to strengthen their already dominant position (Christophers, 2018). Even though there are chances that the organization is a natural monopoly, the abuse of such power should be prevented nonetheless. Hence, federal policies on monopolistic companies encourage competition and highlight the governments role in supporting the local market.

Presidents Role in Launching Workplace Reforms

Theodore Roosevelt was a progressive president with the most comprehensive agenda in terms of labor legislation and worker support. During the coal miner strikes across Pennsylvania, West Virginia, and Ohio, President Roosevelt took the time to pick the correct approach to people and industries to avoid the latter from complete shutdowns (Rohmiller, 2019). The main requirements established by the strikers included an eight-hour working day and a 20% increase in wages. Even though President Roosevelt largely disliked aggressive labor union activities, he was the first-ever American president to support a seemingly radical initiative involving the deployment of a closed union shop. He did not stop there and became encouraging union representatives to accept arbitration. Even though some of the mine owners were incensed by Roosevelts decision, a compromise settlement was achieved (Berfield, 2020). The recognition of unions was postponed, but an eight-hour working day for firemen and engineers was attained together with a 10% increase in wages. President Roosevelt also ensured that workers would have the opportunity to submit their grievances to resolve workplace issues.

References

Berfield, S. (2020). The hour of fate: Theodore Roosevelt, JP Morgan, and the battle to transform American capitalism. Bloomsbury Publishing USA.

Christophers, B. (2018). Financialisation as monopoly profit: The case of US banking. Antipode, 50(4), 864-890. Web.

Feldman, M., Guy, F., & Iammarino, S. (2021). Regional income disparities, monopoly and finance.Cambridge Journal of Regions, Economy and Society, 14(1), 25-49. Web.

German, L. (2022). Interview with Catherine Liu. Journal of Class & Culture, 1(1), 97-104. Web.

Mitchell, M. (2020). Just the status quo?The Journal of the Gilded Age and Progressive Era, 19(2), 305-313. Web.

Page, B. I., & Gilens, M. (2020). Democracy in America? University of Chicago Press.

Papke, D. R. (2019). The Pullman case: The clash of labor and capital in industrial America. University Press of Kansas.

Rahman, K. S., & Thelen, K. (2019). The rise of the platform business model and the transformation of twenty-first-century capitalism.Politics & Society, 47(2), 177-204. Web.

Rohmiller, A. (2019). Flight to the top of the world: The adventures of Walter Wellman by David L. Bristow. Ohio History, 126(2), 97-98. Web.

Surdam, D. G. (2020). John D. Rockefeller and Standard Oil. In Business Ethics from the 19th Century to Today (pp. 159-176). Palgrave Macmillan. Web.

Economic situation

The interest rate, the unemployment rate and inflationary pressures are key economic indicators. These parameters elaborate how well the economic is performing. The interest rate denotes the cost of credit services; the employment rate is an indicator of the percentage of the population that is employed while the inflationary rate is an indicator of the ratio of production (output) and the money in circulation. In the last five years, these parameters have changed massively. In 2008, which was the climax of the depression the interest rate was about 1.5 %. In the subsequent years, the rate has decreased significantly below zero. This is an indication that the federal fund interest rate is lower than the inflation rate. The overall impact of this scenario is a negative lending rate.

The federal bank may lower the interest rate to encourage lending. Lending results in more money circulating triggering additional consumption, which is a key driver of the American economy. The unemployment rate has also been changing over the last five years. In January 2008, the interest rate was about 5%. However, by June 2009, it was well above nine percent. This was attributable to the recession, which had taken a toll on most organizations. As such, many companies were opting to downsize or close down. This resulted in retrenchment of numerous people. The highest unemployment rate was 10.1% in 2010. The inflationary rate has also been changing irregularly over the years. However, it has not formed any clear pattern even under the economic crisis (Schiller, 2003).

Currently, the economy is better. The inflation rate, unemployment rate and inertest rates are relatively lower. In an economy, which is driven by speculation and consumption, decreases in the above rates are likely to trigger additional investment. There has been a return to normalcy with respect to international trade, but investors remain sceptical. Overall, there are some fundamental improvements, which have occurred (Schiller, 2003).

Improving spending

For spending to increase, the public should have additional resources at their disposal. One way of improving spending is by boosting the availability of credit facilities. The government can accomplish this by lowering the lending rates. Lowering the lending will result in people paying lower rates for credit offered. Consequently, many people will take up loans. Taking up of loans will result in people having more cash that they can expend. This will trigger additional consumption. Increase in consumption will trigger additional production. The additional production triggered by the extra spending will require labour boosting employment in the economy. This idea normally results in more funds circulating in the economy. If there is no production to match the increase in funds, then inflationary pressure may rise (Taylor, 2010).

The second strategy the federal government can utilize to increase spending is through lowering taxation on commodities. Taxation on commodities and services increases the cost of goods and services. As a result, it reduces a consumers disposable income. The federal bank can boost the consumers disposable income without increasing the actual income earned. However, this strategy would result in minimal increases in spending. This strategy should be completed by other strategies such as reduction of income tax. The combination of these two strategies will result in substantial increases in expenditure. Increased spending triggers additional production. The additional production requires factors of production such as labour, which culminates in higher levels of employment (Schiller, 2003).

Anti-trust laws

Monopolies occur when one entity dominates an industry. Consequently, other firms have no chance of competing effectively with a monopolistic entity. There is minimal competition in a monopolistic industry. As such, the dominant entity sells to most of the clients in such an industry. Many monopolies make super profits since they can raise their prices as they wish. In the defence industry, there are three large firms, which are Lockheed martin, Northrop Grumman and Boeing. Lockheed martin is the most powerful followed by Northrop Grumman and Boeing respectively. The proposed merge involved Lockheed martin and Boeing.

This would have resulted in monopoly since Northrop Grumman could not match the resultant entity in terms of sales and resources. The US department of defence halted this merger citing ethical concerns such as competition. The defence department is the companies biggest customer. Consequently, the merger would have denied the department a choice when it comes to the vital defence contracts. The merger would have resulted in the largest defence entity globally. Subsequently, the entity would have dominated in terms of contracts bids and sales.

Defence contracts would encounter a monopoly since Northrop Grumman could not match the entity that would have resulted from the merger of Lockheed martin and Boeing. A merger of this magnitude would have had many positive impacts in the two entities. First, it would increase efficiency in both entities after merging operations. Additionally, the resultant entity would have best technology in the sector. The merger would also increase the capacity of the resultant organization, which would surpass that of the two constituent entities.

Economic efficiency in a monopolistic sector

Economy efficiency is only achievable in a perfect market. A perfect market is an industry in which there is fair competition and the forces of demand and supply set prices. In such a market, customers buy products whose value is equal to the price. Nevertheless, monopolies sell commodities at prices, which by far exceed the value in the commodities. As such, customers pay amounts, which exceed the values they are receiving. This signifies that monopolistic tendencies are the key cause of economic inefficiency. Raising prices unreasonably results in the efficiency. Monopolies also prevent the entry of other firms in an industry. Thus, denying the clients variety form they would choose the best product. This is a key undoing of monopolies, which deter production of a variety of goods with the best value possible. With time, monopolies develop complacency, which reduces innovation.

As such, the entity fails to offer any additional value for excising its dominance over the industry with regard to pricing and the clientele base. Monopolistic entities predominately focus on controlling the industry. Hence, the entry of a competitor will likely trigger a price war. This kind of an economic conflict will have many repercussions. The entity with more resources may undercut its prices. Consequently, most of the customer will buy form the entity which undercuts its prices. The other entity competing cannot sustain such a strategy so it will maintain it prices. The entity, which fails to undercut its prices, will have fewer clients and will eventually run out of business. This will leave the other entity, which will later raise it prices to recoup it losses (Kahn & CESifo, 2003).

Discounts

Discounts are a vital aspect of increasing clientele. A discount denotes a reduction in the price of a commodity or addition of quantity for the same price. Companies offer discounts to boost sales or as a reward to their clientele. The discount could entail additional quantity of a good. In case of services, discount will entail reduction of prices. A business, which is offering discounts, must undertake proper planning. This will ensure that the entity finances do not diminish to unsustainable levels. Entity offer discounts in the festive period since customers make massive purchases. During such periods, an entity can offer discounts since there are high volumes of sales. Determining the discounts to offer is not an easy undertaking. The firm has to consider the clientele and its corporate ambitions.

One means of determining the interest to offer entails using rates. A rate denotes a percentage of the entire price. Members of a company who have access to appropriate data should make this managerial decision, which entails determining the best discount rate. Most of the discounts rates are below ten percent. The marketing department should have the capacity to determine the appropriate percentage. The department should consider all the entitys corporate target. The entity must earn a certain level of profit to support its operations. Most entities prefer a discount rate that ranges between five and ten percent.

The second method of establishing discounts entails offering quantity discounts. The customer will pay the old price, but he/she will get extra quantity of the product. This is exceedingly common in cosmetic products. This method is applicable on smaller goods, which have lower prices. The application of this method is limited to certain commodities. Discounting based on rates is more applicable than the latter.

References

Kahn, L., & CESifo. (2003). Sports league expansion and economic efficiency: Monopoly can enhance consumer welfare. Munich: CESifo.

Schiller, B. (2003). The macroeconomy today. Boston: McGraw-Hill/Irwin.

Taylor, L. (2010). Capital, accumulation, and money: An integration of capital, growth, and monetary theory. New York: Springer.

Monopolies are a danger to society as well as to the business environment. Governments plan interventionist policies to curtail the growth of natural or cartel monopolies in order to keep the business environment stable. Antitrust acts enacted by governments are believed to improve consumer welfare (Crandall & Winston, 2003; Stigler, 1982). Government interventions are aimed at controlling natural monopolies so that the prices in the market do not become exceedingly high. This paper looks into the policies and regulations that the US government took to control the growth of monopolies.

The monopolies in the US have a long history beginning with the colonial administrations (Investopedia, 2010). With the growth of corporations in the new word, there arose extreme forms of capitalism and rampant price-fixing that hampered the well-being of the people. The first attempt to regulate businesses was in 1887 with the Interstate Commerce Act (Stanford, 2013). However, the act to control the growth of monopolies came three years later. The Sherman Antitrust Law was passed in 1890 to check the growth of monopolies in the US, which was probably the first attempt to curb monopolies through government control in the country (Investopedia, 2010; Stanford, 2013).

It is believed that the Sherman Act opened the road for jurisprudence regarding monopoly, cartels, and oligopoly (Kovacic & Shapiro, 2000, p. 43). The act aimed at declaring illegal all forms of monopolies and violation of the act was treated as a crime (Kovacic & Shapiro, 2000, p. 43). In 1903, the country saw a few major corporate mergers when the Roosevelt government was in power. The government broke the merger of the Northern Securities, and then the Supreme Court broke Standard Oil in 1911 into 34 small firms (Markovich, 2013).

In 1914, President Woodrow Wilson brought in the Clayton Antitrust Act and Federal Trade Commission (FTC) to strengthen up the governments fight against emerging monopolies (Markovich, 2013). This law increased the strength of the antitrust law that limited the scope of companies to indulge in anti-competitive behavior (Spengler, 1950).

Many US companies like the IBM encountered troubles with the antitrust law. For instance, in 1936, a marketing strategy undertaken by IBM ran into troubles with the antitrust law (Chang, 1995). After this, the FTC was given independent powers to control, regulate, and investigate monopolies. Price discrimination was controlled as a strategy to curtail monopolies by the US government with the Robinson-Patman Act of 1936 (Rowe, 1951). Overall, the US government has been instrumental in developing antitrust laws to curtail the growth of monopolies in the country.

Stigler (1955) makes a distinction between the kind of antitrust laws based on their objective  preventive and corrective. He believes that both the Sherman and the Clayton Act are corrective antitrust laws and do not have any measures to prevent the development of monopolies in the economy (Stigler, 1955). The typing-clauses and the price discrimination corrective clauses were adopted as measures to prevent the spread of monopoly rather than preventing them from appearing.

The antitrust laws post-1992 became extremely strong, and there arose various preventive measures. The regulative tools became more of a guideline to prevent monopolies through mergers. In recent times, the monopoly control body of the country has increasingly aimed at controlling intellectual property rights and patents in order to stop the growth of monopolies in the country.

References

Chang, H. F. (1995). Patent scope, antitrust policy, and cumulative innovation. The RAND Journal of Economics, 34-57.

Crandall, R. W., & Winston, C. (2003). Does antitrust policy improve consumer welfare? Assessing the evidence. The Journal of Economic Perspectives 17(4), 3-26.

Investopedia. (2010). A History Of U.S. Monopolies. Web.

Kovacic, W. E., & Shapiro, C. (2000). Antitrust Policy: A Century of Economic. Journal of Economic Perspectives 14(1), 4360.

Markovich, S. J. (2013). U.S. Antitrust Policy. Web.

Rowe, F. M. (1951). Price Discrimination, Competition, and Confusion: Another Look at Robinson-Patman. The Yale Law Journal 60(6), 929-975.

Spengler, J. J. (1950). Vertical integration and antitrust policy. The Journal of Political Economy 58(4), 347-352.

Stanford. (2013). History of Antitrust regulation. Web.

Stigler, G. J. (1955). Mergers and Preventive Antitrust Policy. University of Pennsylvania Law Review 104(2), 176-184.

Stigler, G. J. (1982). The Economists and the Problem of Monopoly. The American Economic Review 72(2), 1-11.

Monopolies develop according to the definite monopoly market structure which is discussed by economists as opposite to the competitive market because only one seller controls the industry.

A company can be described as a pure monopoly when it is a single seller of certain products or services within the market, when it is a price maker, the barriers to entry are high, and there are no close substitutes for products. The development of a monopoly within the industry creates conditions which can characterize the imperfect competition based on the absence of the other sellers. Moreover, the lack of the substitutes is observed, and the company becomes a monopoly within the market (McConnell, Brue, & Flynn, 2012).

Microsoft is the leading producer of operating systems for personal computers and different types of software in the USA. This leading position is often discussed as an attempt to receive the status of a monopoly within the market in order to gain the high economic profits typical for monopolies oriented to innovations. The recent situation in the market of the computer software is rather controversial. It can be explained basing on the idea that Microsoft tried to gain the market power several years ago.

Microsoft took the leading position within the industry in the 1990s when the most successful variants of the Windows operating system for personal computers were worked out. Moreover, the company presented the effective applications software, and the majority of the personal computers users began to utilize the Windows operating system.

Microsoft Office and Outlook also became popular with the users due to the fact the possible alternatives could not be discussed as the appropriate substitutes for the products and services provided by Microsoft. For instance, the operating system Microsoft Windows 95 was effectively utilized by over than 80% users in the USA because their computers were Intel based (Bittlingmayer & Hazlett, 2000).

Thus, the situation was discussed by the government as critical because of Microsofts possibility to develop into the monopoly with maintaining the control over the market. Microsoft had to change strategies of presenting the products and attracting the buyers after the investigations conducted in 1994 and 1997 in order to address the governments requirements.

The advantages of Microsoft are in the fact the company regularly presents the technologically innovative products which have no substitutes within the market because of their high quality and originality. From this point, Microsofts strategy is based on the active usage of the technological developments results.

Moreover, the company is regulated with references to the effective strategic marketing techniques in order to attract more customers (Bittlingmayer & Hazlett, 2000). According to these points, Microsoft supports its leading position and contributes to developing the controversial question of monopolization of the market. Thus, the leading position of Microsoft depends on the high standards and quality of the products.

The market occupied by the company is so expanded that there are significant barriers to entry which are the companys ownership, peculiarities of pricing, and legal aspects. As a result, customers have no access to any relevant alternative products (McConnell, Brue, & Flynn, 2012). Today, the activity of Microsoft in developing the operating systems should be discussed with references to such competitors as the producers of iOS for Apple and Linux Operating System.

Limiting the possibilities for the competitors entries into the market, monopolies control the industry and develop monopoly pricing, maximizing the profits. Moreover, these processes are associated with the factor of a downward sloping demand curve which is typical for monopolies.

From this point, monopolies are not discussed by economists as the effective way for a company to develop within the industry (Kahn, 1999; Krugman & Wells, 2009). Nevertheless, not all the monopolies are bad. For instance, a natural monopoly does not influence the progress of the market negatively because it depends on the system of the fixed costs. Moreover, not all the monopolies are bad because of the definite support provided by the government.

That is why, government monopolies can be discussed as good monopolies or legal monopolies. However, the government can regulate and control not many monopolies. The U.S. Postal Service is the legal monopoly developed in the country because the activity of the company is controlled by the government, and the specific functions can be realized only by the U.S. Postal Service (Krugman & Wells, 2009).

It is possible to conclude that monopolies challenge the principle of the perfect competition and can be discussed as the negative factor for the industry and markets development. Nevertheless, such types of monopolies as natural monopolies based on the large economies of scale and constant marginal costs which can be less than average ones and legal monopolies which are characterized by the governments control should not be discussed as absolutely negative structures because they develop according to the specific principles.

Economists agree that the main disadvantages of monopolies are associated with the characteristics of pure monopolies when only one company is a seller within the market with the possibilities to control it and provide the barriers to entry. Furthermore, the monopoly market structure provokes the growth of prices which are often higher than the prices within the competitive markets.

References

Bittlingmayer, G., & Hazlett, T. W. (2000). DOS Kapital: Has antitrust action against Microsoft created value in the computer industry? Journal of Financial Economics, 55, 329-359.

Kahn, A. E. (1999). The economics of regulation: Principles and institutions. USA: The MIT Press.

Krugman, P., & Wells, R. (2009). Economics. USA: Worth Publishers.

McConnell, C. R., Brue, S. L., & Flynn, S. M. (2012). Economics. USA: McGraw-Hill.

The economy of the United States of America is arguably among the best performing in the world. Rated as the second largest globally, after the economy of the European Union, the American economy has in the recent past gone through a lot of turbulence, including the worst financial crisis of 2008. However, with an approximate GDP of 102 in 2012, the country has performed better than other advanced economies (see figure 1) (U.S. Department of the Treasury, 2012). The performance of an economy is usually evaluated by economic indicators, such as, inflation rates, interest rates, GDP, and unemployment rates. Economists can deduce the growth of an economy by evaluating the economic indicators as they vary with time. For instance, the performance of the American economy in the past five years can be assed from the values of the economic indicators of 2008 through to 2012.

Any country that aspires to attain significant economic growth must tame the rate of unemployment, because a high unemployment rate inhibits economic growth. This is partly because high rates of unemployment results into higher expenditures with minimal revenue (Levine, 2012) The US government is aware of the consequences of unemployment on her economy. Unfortunately, the unemployment rates seem to be growing by each day. According to the data obtained from the website of the Bureau of Labor Statistics (United States Department of Labor), the highest rate of unemployment in 2008 was recorded in December with a value of 7.3, whereas 2012 experienced the worst unemployment rate at 8.3 in January, February, and July (USA Dept of Labor, Bureau of Labour Statistics, 2012).

On the other hand, the US has been experiencing a decline in inflation rates in the past five years. Available data indicate that inflation rates were highest at 2.93 percent in January of 2012, whereas the average inflation rate in 2008 was at 3.85 percent. One of the factors that influence interest rates is inflation rates. In the year 2008, the US experienced an average interest rate of 2.8 percent; this was higher than the highest interest rate of 0.167 percent recorded in July 2012 (The World Bank, 2012).

It is true that government policies have a direct impact on investments and the general growth of an economy. Therefore, a government with sound policies can encourage both local and external investments. This leads to more revenue generation, creation of employment opportunities, and other significant economic growth factors. Governments should encourage investments and savings by prescribing favorable tax regimes on the same. For instance, lower tax rates should be levied on investments in research and development, capital gains, and other entrepreneurial activities (Kennedy, 2000). The government should encourage partnership between small and large businesses. McKinney (2011) argues that since many innovations are generated by small entrepreneurs who lack investment capital, the government should put in place tax and IP incentives that will make small entrepreneurs an attractive investment option for big businesses. He cites bureaucratic systems in big corporations as the major stumbling block to innovations (McKinney, 2011).

A court case filed by the Justice Department and 19 states of America, accusing Microsoft Corporation of infringing on the nations antitrust laws, was ruled in favour of the plaintiff on 4^th April 2000. Among other things, the government accused the corporation of engaging in predatory and anticompetitive behaviour that were in total contravention of the antitrust laws (Brinkley, 2000). In total disregard of the law, especially the vertical restriction of the 1995 consent decree, Microsoft Corporation was accused of hurting consumers by bundling products and suppressing competing products, such as Netscape browser. By integrating Internet Explorer (IE) into the Windows operating systems, and forcing computer manufacturers to sell their products with these operating systems, Microsoft Corporation was unfairly competing with the manufactures of stand-alone products with functions and features similar to IE (Economides, 2001).

Economides (2001) reports that while ruling in favour of the government, the presiding judge proposed that the corporation was, henceforth, required to adhere to strict business rules. Furthermore, Microsoft Corporation was supposed to be split into two companies. The corporation appealed against this ruling and it was consequently overturned. Nonetheless, the appellant court agreed with the findings of the facts by the first court. Subsequent to this turn of events, the Department of Justice relented on its quest for splitting Microsoft Corporation and instead demanded a lesser antitrust penalty. The two parties reached an agreement, whereby Microsoft was compelled into permitting computer manufactures to incorporate non-Microsoft software into their products (Shapiro & Kovacic, 2000). Furthermore, the settlement paved way for third-party companies to freely access all records and the application programming interfaces of Microsoft Corporation for five years (Economides, 2001).

To understand the drawbacks of a monopoly, it is necessary to make comparisons between the market forces inherent in a monopoly and those within a competitive environment. First, it is clear that a monopolistic environment supports higher prices, lower outputs, and less consumer surplus as compared to a business environment composed of competing players (Economides, 2001). Secondly, the destiny of profits accrued from monopolistic businesses is always expected to raise equity issues. The beneficiaries of these profits are shareholders, and most of them are usually wealthy individuals. The high pricing is therefore an exploitative venture to low income consumers, whose purchasing power is likely to be taken over by high income consumers through dividends. Finally, production of goods in monopolies does not attain the minimum average cost and this derails economic growth (Economides, 2001).

In a free market economy, the same product can be sold to consumers at different prices. However, while selling the product in this manner, well-thought-out strategies should be employed to guard the business against loosing its customers. The consumers who buy this product at higher prices may decide to buy from different sellers in their subsequent purchases. The seller should study the behaviour of consumers before making a decision on how much the price for the product should be varied for each one of them. For instance, if the seller acknowledges the willingness to pay a particular price for a certain product by a certain group of consumers, then the product can be sold to this group accordingly without alienating the consumers (University of Pennsylvania, 2007). Another successful approach at price discrimination is in the form of market segmentation based on social class. A product can be sold to consumers at different prices, as long as the prices are strategically differentiated according to social classes. Pharmacists have succeeded in selling drugs to consumers at different prices by establishing retail stores near the consumers. This strategy has been successful because people from different social classes often live in different places (University of Pennsylvania, 2007).

References

Brinkley, J. (2000). U.S. vs. Microsoft: The overview; U.S. judge says Microsoft violated antitrust laws with predatory behaviour. New York Times. Web.

Economides, N. (2001). The Microsoft antitrust case. Journal of Industry, Competition and Trade: From Theory to Policy, 1(1), 739.

Kennedy, E. P. (2000). Microeconomic essentials: understanding economic news. 2nd ed. Cambridge, MA: Massachusetts Institute of Technology.

Levine, L. (2012). Economic growth and the unemployment rate. Congressional Research Service. Web.

McKinney, P. (2011). What should the role of government be in encouraging small business innovation?Forbes. Web.

Shapiro, C. & Kovacic, E. W. (2000). Antitrust policy: A century of economic and legal thinking. Journal of Economic Perspectives, 14(1), 4360.

The World Bank (2012). Real interest rates. Web.

University of Pennsylvania, (2007). Approaches for retailers. Vol. 2. Web.

US Department of Labor, Bureau of Labour Statistics Labour Force statistics from the current population survey. Web.

U.S. Department of the Treasury. Recent U.S. economic growth in charts. Web.

Duopoly

The word oligopoly is derived from a word in Greek, oligois, meaning few and the Latin word polis which may mean few (Mandal, 2007). In microeconomics, oligopoly is a term that refers to a situation in which there are few firms in the market.

Owing to the fact that the number of firms is small, there is often a significant degree of interdependence between the firms. This interdependence is seen in the fact that each firm must consider rival firms decisions with regard to price and output policy (Mandal, 2007).

The simplest case of oligopoly is that represented by a duopoly where there are only two sellers. In the case provided the two sellers are the only competitors in their respective business.

Based on the point noted above it is clear that these two have a strong interdependence with respect to prices and outputs. It has been observed that based on their decisions with regard to operation the two could significantly change their profits.

Given that if one cheats and another cooperates, the cheater would earn $1.2 million and the cooperator would earn $200,000 we can assume that this option is unlikely to succeed. If both cheat, they stand to generate $500,000 each and if they cooperate they stand to generate $1 million each. It would appear that the two would opt to cooperate and generate $1 million, with each partner acting as a monopolist in their business.

This position is reached due to the fact that it is not uncommon for oligopolistic firms to reach an understanding that promotes their common interest (Mandal, 2007).

This comes about because of the fact that the primary objective of business which is profit maximization. Due to the presence of a small number of competitors it is likely that through cooperation the two firms will collaborate to create a monopolistic environment.

Unregulated Monopoly

It has been observed that certain industries operate best as monopolies given that to allow for competition would negate the main economies of scale associated with the nature of such industries (Musgrave & Kacapyr, 2009).

An example of this is seen in plants that generate electricity which require massive generation plants and transmission/distribution networks. Most monopolies are regulated so as to maximize their utility to the consumers.

However, there are instances where a monopoly may operate unregulated. In this case, this monopoly acts with the objective of profit maximization. In such a scenario the organization will determine prices and output at the level of output where Marginal cost is equivalent to marginal revenue (Musgrave & Kacapyr, 2009).

The absence of regulation reduces output and increases product prices. The result is a price that is higher than the competitive price and output which is lower than that of the perfect competitor.

Given the above scenario if a second firm enters the market it is possible to assume that the demand for the product will fall due to the forces of demand and supply. This comes in light of the fact that as supply of a product increases the demand decreases.

In relation to the cost of production it can be assumed that it will also decline. This comes in light of the fact that an unregulated monopolist produces goods at maximum price with minimum cost. Based on this the reduced demand will also reduce production costs.

References

Mandal, R. (2007). Microeconomic Theory. New Delhi: Atlantic Publishers & Distributors (P) Ltd.

Musgrave, F., & Kacapyr, E. (2009). Barrons AP Micro/Macroeconomics. Hauppauge, NY: Barrons Educational Series Inc.

Introduction

The essay is an over view of monopoly. The chosen company or organization for the purposes of this study is Monsanto a company that holds about 70% to 100% of the market in commercial seed. It is well known for producing herbicide roundup, pesticide, crop seeds and it was sued by those organizations that compete with it for monopolistic practices as well as anti-trust.

The company was founded in 1901 and headquartered at Creve Coeur, Missouri in United States of America. It employs slightly over 21,000 as at 2009. In 2008 its revenue and net income stood at $11.37 and $2.02 billion.

Economists coined the term monopoly to refers to an existing situations whereby a particular person or an organization do have adequate say or control concerning given goods or services thus determining as well as dictating the conditions or terms under which consumers as well as other persons will have the potential to land their hands on such goods or services. There are four main characteristics of monopoly, single seller, market power, price discrimination as well as firm and industry.

History of Monsanto

It was founded in 1901 and well known as a multinational corporation that leads in biotechnology in the field of agriculture; additionally it produces genetically engineered seed. 18 years down the line, it partnered with Grassers Chemical Works thereby expanding its business in Europe. It later grew to produce industrial chemicals. In 1940 the company became well known in producing plastic. Four years later it started producing DDT bit was later banned, in 1949the corporation acquired the American Viscose (Julfekar, 2010).

Five years down the line it joined hands with Bayer to engage in Polyurethanes in United States of America. The corporation bought G.D Searle &Company. It is important noting that, 11 years later, it acquired 49.9% of Calgene and before the end of that year, it again acquired close to 5%. In 1997, it spun of its fiber division as well as industrial chemical. It later sold three of its companies among them NutraSweet Co.

In 2000 it entered into a merge with Upjohn and Pharmacia. Five years down the line the corporation acquired Seminis a company that is a leader in producing fruits and vegetable seed. At the end of 2007 the business venture purchased Delta as well as Pine Land Company. Two years ago, 2008 it again purchased De Ruiter Seed while selling its brand Posilac. It now controls above 70% of the agricultural market in USA. In my view, Monsanto acquired it monopoly status through vertical mergers as well as acquisitions.

Market impact of the monopoly

It is worth noting that Monsanto Corporation through its monopolistic characteristic did impact both positively and negatively to the market. Traditionally, monopolies do impact especially in prices; it either lowers prices or makes it to skyrocket.

In this case, Monsanto at some point set their prices so high that Americans as well s other consumers were unable to buy their product, but due to lack of better substitutes they had to buy these products but at lower volumes (Montague, 1999). Additionally, due to monopoly, competition was not in existence, thus the products being produced ere not of high quality and competitive in terms of prices. Consumers had fewer choices.

Market acquisition

Just like other monopolies, Monsanto has been in law suits over various issues. Notably, in India, the corporation was accused of trying to control the cotton industry (Gersema, 2003). It has also been accused of controlling biotech corn as well as department of Soybean seed.

Concerning predatory pricing, the company was accused to misusing its monopoly to unlawfully monopolize and freeze competition relating to glyphosphate and maintaining a supra-competitive price (Stewart, 2010). Additionally, the corporation has been accused of antitrust as the company was accused of misusing its dominance it dominance in roundup to forcefully make companies that produce seed to license the company biotechnology.

References

Stewart, T. (2010). How monopolies impact consumer prices. Web.

Montague, P. (1999). Monsanto: The Bad Seed. Environmental Health Weekly, 21(6), 2-16.

Gersema, E. (2003). Death Sentence for MonsantoRoundup Resistant Weeds. Associated Press.

Julfekar H. (2010). Types of Monopoly. Web.

Introduction

At one point in the history and evolution of companies and markets, monopolies were common across the world. During those times, competition was low for various reasons. Firstly, start-ups were few, and thus the monopolistic companies did not have emerging competitors. Secondly, the emerging competitors were highly disadvantaged due to the lack of sufficient capital to carry out rigorous marketing or influence the market prices. Therefore, monopolistic companies were in a position to counter any form of competition by using their elaborate financial muscles and customer loyalty.

However, with the technological revolution, competition has heightened and different companies are coming up with novel ideas to rival even the well-established entities. The marketing dynamics have changed and companies even without enough marketing resources can use emerging technologies to market their products.

Microsoft is the best case in point of this assertion. Before the early 21^st century, Microsoft was the dominant player in the world of computers; however, rival companies have emerged with novel ideas, thus overthrowing Microsofts market dominance. Currently, Apple is the dominant force in the ICT world; however, it might suffer the Microsofts fate if it does not treasure continuous innovation to sustain its popularity and dominance. Continuous innovation is the key to the sustenance of dominance of any market player in the contemporary world.

How developments in technology erode monopoly power

According to the given passage, developments in technology are the antidote to monopolistic entities. Companies become monopolies by creating unrivalled products and services, or by law. Unfortunately, after becoming monopolistic, most companies become reluctant and they assume that yesterdays innovations will meet tomorrows market demands (OGrady 2008). Therefore, such companies bask in the past glory for long until novel rival products enter the market and take over. In the past, customers remained loyal to a certain product or service perhaps due to lack of options.

For instance, in the Microsofts case, consumers did not have many choices when deciding on the computers to use. Therefore, Microsoft enjoyed unrivalled market dominance and even though the company lacked continuous innovation, consumers did not have the choice to move on to another brand. Unfortunately, the 21^st century heralded a revolution in the technology world coupled with the emergence of antitrust laws, thus disadvantaging erstwhile monopolies like Microsoft.

After its establishment, Apple struggled for over two decades to establish itself as a key market player in the ICT industry. Unfortunately, it could not overcome Microsofts dominance. However, the successful entry of iPod music player and iTunes music store in 2001 and 2003 respectively was a game changer in the ICT world (OGrady 2008).

At this point, Microsoft was still the dominant player in the PC industry, while Apple was an upcoming rival. By this time, Microsoft could have embraced the emerging technologies to diversify its products, but it did not and on the other side, Apple utilised this opportunity to diversify its products and markets. Apple embraced the iPod and iTunes idea, thus introducing a novel idea to consumers. Given that consumers have an insatiable hunger for new products and experiences, they shifted their focus to Apple, thus underscoring how innovation breaks monopolies.

Conventionally, consumers go for value for their money. This assertion leads to the view that consumers leverage the pain that they feel whilst purchasing a product by the joy and satisfaction that they derive from using the product. Even though indirectly, consumers control monopolies. For instance, monopolistic companies cannot sustain their dominance without the consumers goodwill.

At this point, it is important to note that consumers remain loyal to products not companies, and this aspect serves as the only link between consumers and companies. This assertion explains why consumers shift their loyalty and focus to other satisfying products regardless of the companies behind the products. If consumers were loyal to companies as opposed to products, start-ups would never breakthrough in any market. This understanding explains how development in technology breaks monopolies as explored in the next paragraph.

Development in technologies assists companies to come up with novel ideas. The novel ideas give birth to new products that meet the consumers unattended needs at a certain time. Therefore, based on the earlier assertion that consumers are loyal to products as opposed to companies, the new product attracts customers who were hitherto loyal to products from a monopolistic entity. Consequently, the monopolistic entity loses customers and as stated earlier, customers sustain monopolies. Therefore, without the support of customers, monopolies start to crumble under the weight of diminishing revenues and constant costs of production and operation. Within no time, the monopolistic power is broken as consumers move to the novel products from the innovative company.

This chain is repetitive and the company that breaks the monopoly of another entity by winning the consumers loyalty suffers the same fate if another company emerges to provide better products and services. This scenario underscores the Microsoft and Kodak cases. These erstwhile monopolistic companies were robbed of their dominance courtesy of emerging companies that had embraced innovation. Developing technologies are synonymous with innovation, which implies novel ideas, hence new products.

Therefore, developments in technology break monopolies by facilitating innovation, which introduces novel products in the marketplace, thus wooing consumers to shift their loyalty. This shift breaks monopolies, as they cannot stand without the support of consumers. Unfortunately, the chain is repetitive and the emerging companies face the same fate when they neglect further innovation. For instance, if Apple does not keep on coming up with new products, then its market dominance will diminish in the face of upcoming technologies and innovations.

Two similar examples

One of the most outstanding monopolies that have broken up under the weight of developments in new technology is AT&T monopoly. Even though most critics argue that AT&T monopoly existed due to legislations, the company had the option of becoming competitive even after the 1982 decision to break up its monopoly via law. The emergence of mobile telephony was irresistible and this new technology would undoubtedly revolutionise the telecommunication industry.

Currently, Verizon Wireless enjoys the market dominance that was once the preserve of AT&T. AT&T Mobility comes in the second place in terms of wireless telecommunication services provision. Verizon Wireless boasts in its ability to provide strong signals across the United States. The company has used emerging technologies to assert its dominance in the market. For instance, in 2011, the company launched its Verizon iPhone 4 to win more customers who were seemingly dissatisfied with AT&Ts allegedly poor network coverage.

The other example of a monopoly broken down by developments in technology is the United States Postal Services (USPS). In the 19^th century, this institution had monopolised the delivery of mails across the United States (Armentano 1999). However, the emergence of the Internet toppled this erstwhile giant and currently, the institution has been posting losses for the last three consecutive years. The development of the Internet facilitated the innovation of online mail delivery services and with the entry of Yahoo and Google in the market, the USPS was doomed to failure.

Currently, individuals simply log into their online mail services and forward the needed information to the relevant destinations. In addition, social media is revolutionising the communication landscape, which further dims the USPSs relevancy in the contemporary times. Even though the supporters of the USPS hold that its relevancy will remain in decades to come, this papers objective was to highlight how the organisation lost its monopolistic powers to emerging technologies.

Conclusion

Monopolies were a common occurrence in the American markets before the 21^st century. Consumers sustain monopolies and the moment a rival enters the marketplace and provides novel products, consumers shift their loyalty. In most cases, monopolies were sustained by legislations, but the moment the legislations were countered with antitrust laws, the competing companies gained footing in the market.

For instance, Microsoft remained a monopolistic establishment until early 21^st century when Apple embraced developments in technology to come up with novel products like iPods and IPads among others. Similarly, AT&T and the USPS suffered the same fate in the hands of technology and emerging companies like Verizon and Google took advantage of the technologies to come up with novel products, thus gaining market dominance.

Developments in technology give way to innovations, which in turn herald the development of novel products, which win consumers loyalty. This way, monopolies are broken as they lose customers to the upcoming innovative companies (Armentano 1999). This assertion holds for without consumers, monopolies cannot stand.

Reference List

Armentano, D 1999, Antitrust and Monopoly: Anatomy of a Policy Failure, The Independent Institute, Oakland.

OGrady, J 2008, Apple Inc. (Corporations That Changed the World), Greenwood Press, Westport.