Category: Monopoly

Introduction

Blue Cross and Blue Shield Association (BCBSA) is an organization that provides health insurance to more than 99 million Americans (Bailey, 2013). It comprises health insurance organizations and companies. The association offers health insurance to people in all American states and participates in administration of Medicare. It offers health insurance coverage to all government employees under Federal Employees Health Benefit Plan.

In 2010, claims emerged that some organizations under the association were engaging in antitrust activities thus affecting the healthcare market negatively. They were increasing insurance rates by avoiding competition thus creating a monopoly (Bailey, 2013). The association was accused of running an anticompetitive scheme that resulted in high costs of insurance premiums and healthcare services.

Anti-trust case

The anti-trust case involving Blue Shield and Blue Cross Association involved running of an anticompetitive scheme. The scheme led to high costs of insurance premiums thus making healthcare services unavailable to many people (Hylton, 2003). The association benefited greatly because they dominated the health insurance market in the United States. The association was also accused of conspiring with its members to divide the healthcare market into regions that facilitated eradication of competition among members (Hylton, 2003). The litigation raised doubts over the legality of agreements between the association and its members. The illegal activity increased costs in the healthcare sector making many healthcare services inaccessible to low-income earners.

The association violated the Sherman Act and other antitrust laws because it restricted competition between members (Bailey, 2013). The ongoing case might cost the association greatly because plaintiffs are demanding for triple the amount of damages incurred. In addition, plaintiffs are demanding for legal action against the association to stop it from restricting competition among members.

In response to the charges, the association maintained that the charges lack merit. The association’s spokesperson, Tilden Katz said that the litigation was baseless and unimportant (Hylton, 2003). In mitigation, BCBSA argued that the terms contained in its agreement with members allowed it to act that way in order to protect its brand. In addition, it claimed that their insurance system is committed to providing affordable health insurance to hospitals and doctors, while at the same time improving lives of people (Longstreth, 2010). This is evident from their long-term plan of transitioning into a nonprofit association that will contribute $ 1.56 billion to offer insurance service to the community.

Lessons learned

Many lessons were learnt from the litigation. First, competition in the healthcare sector is healthy and necessary (Longstreth, 2010). Lack of competition leads to monopoly by certain organizations thus raising the cost of healthcare. This makes healthcare services inaccessible to low-income earners. Secondly, it is necessary to adhere strictly to antitrust laws that govern the healthcare market (Longstreth, 2010). Antitrust lawsuits are very expensive and have negative impacts on organizations. For example, more than 38 lawsuits were lodged against Blue Shield and Blue cross Association. Antitrust litigation tarnishes both the image of the organization and drains their finances by paying damages.

Recommendations

To avoid a Federal Trade Commission investigation because of an antitrust litigation, the firm should follow requirements of the law on merger between organizations (Chin and Royall, 2000). To enhance competition and productivity, the firm should avoid entering into agreements that compromise competition in the market. In addition, it will help avoid violating antitrust laws. Another thing that the firm should do is to get acquainted with antitrust legislation to avoid violating any of its provisions. The firm should also seek to establish competition in order to improve efficiency and productivity (Chin and Royall, 2000).

Competition encourages organizations to develop new ways of doing things that are absent in other organizations plying a similar market. This encourages creativity and innovativeness, aspects necessary for growth. Conducting research on benefits of competition will help the firm to avoid antitrust litigation (Chin and Royall, 2000). The firm should hire a professional who is well conversant with antitrust legislation. The professional will have the sole responsibility of advising the firm on matters concerning mergers so that t can avoid violating antitrust laws (Chin and Royall, 2000). The professional could be a lawyer who will serve as a legal adviser. In addition, he will be responsible for monitoring whether requirements of antitrust laws are implemented correctly.

Conclusion

Antitrust litigation is meant to eradicate illegal business practices and abolish monopolies by organizations that tale advantage of others. It serves to encourage competition between organizations or firms plying a similar market.

In 2010, Blued Shield and Blue Cross association was accused of promoting anticompetitive schemes among its members. It allegedly agreed with its members to divide healthcare sector into regions so that they could eradicate competition. This was against antitrust laws. In mitigation, the association claimed that their agreement allowed them to act that way. In addition, it argued that they are committed to providing cost-effective healthcare insurance to Americans. To avoid such litigation, firms should adhere to litigation laws strictly and hire professionals to help them avoid such violations during mergers.

References

Bailey, B. (2013). Blue Cross, Blue Shield Accused in Antitrust Lawsuit of Anti-Competitive Scheme. Web.

Chin, Y., and Royall, M. (2000). Antitrust Litigation: Strategies for Success, 2000. New York: Practicing Law Institute.

Hylton, K. (2003). Antitrust Law: Economic Theory and Common Law Evolution. London: Cambridge University Press.

Longstreth, A. (2010). Blue Cross and Blue Shield Antitrust Lawsuit Pile Up. Web.

The Clayton and Sherman Antitrust Acts were the first antitrust legislation to be enacted in the United States. Additionally, they were both passed to ensure that small and large companies compete fairly in the market economy.

Clayton Act controls unscrupulous practices, such as exclusive dealing contracts and price discrimination, which may interfere with fair competition in the market economy. Besides, this Act was implemented by the Department of Justice and the Federal Trade Commission.

On the other hand, Sherman Act was enacted to prohibit corporations from engaging in any trust, conspiracy, or contract, which may monopolize the market (Helewitz and Edwards 38).

The Federal Trade Commission (FTC) and the Department of Justice (DoJ) play significant roles in the enforcement of antitrust regulations. Moreover, Federal Trade commission handles cases that relate to unfair business practices such as monopolistic competition, deceptive advertising, price discrimination, and scams.

It also reviews the cases and mergers to check for any corporations that might engage in unfair competitions. Conversely, DoJ prosecutes persons found to violate the antitrust acts. The DoJ takes such persons to courts and files suits against them, which may lead to imprisonment or large fines (Miller and Cross 568).

The United States has effective antitrust policies that it uses to control unfair competition in its market economy. Additionally, the antitrust rules are enforced by the DoJ and FTC. The effectiveness of the policies should be based on their success in relation to the objectives they should achieve.

The U.S. antitrust policies are effective as they keep the corporations from setting unfair prices. For instance, the implementation of the policies has led to removal of the monopolies and creation of an environment in which every company has equal opportunity to compete for market resources (Utton 200).

Federal Regulatory Agencies

Apart from the FTC, there are other federal regulatory agencies in America. Some of the other agencies include the Commodity Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC) and the United States International Trade Commission (USITC).

By establishing CFTC in April 1975, the United States future market could easily be controlled. Besides, creation of SEC in 1934 also led to the control of market securities. It also takes part in the enforcement of federal laws that control the securities in trade.

Creation of USITC on September 8, 1916, led to the provision of important information regarding trade in the American market. Moreover, its establishment also led to the provision of expertise who worked in the executive and legislative branches of the government (Rosati and Scott 242).

The three independent regulatory legislations, CFTC, SEC, USITC, have their own strengths and weaknesses. The CFTC is recognized for educating consumers about the future markets in the country. Conversely, it has failed to provide adequate information regarding different kinds of frauds in the market.

One of the strengths of SEC is that it interprets federal security regulations, amend and issue new laws. Additionally, it coordinates other regulatory bodies that also deal with securities matters. The last legislation, USITC, excels in analyzing industrial and economic matters.

It also investigates intellectual property-based imports. However, the USITC has not been able to provide adequate tariff and trade information. Consequently, this has made the external customers incur losses (Rosati and Scott 243).

The three regulatory legislations are effective as their operations are not in any way affected by other arms of the government. Congress is responsible for the creation of the legislation in the United States. Moreover, the president with the approval of the senate is responsible for appointing the commissions.

Members of the congress are only allowed to serve for a fixed term. Besides, they should demonstrate integrity during their services. The effectiveness of the legislations is also evident in their success as they are able to create rules that control operations of various corporations (Funk and Seamon 10).

Groundswell

Groundswell is a network in which people apply technologies to obtain what they need from one another. The main components of groundswell are people and the Internet. For instance, people use Internet to sideline the corporations and neutralize their effects in the market economy (Li and Bernoff 3).

The groundswell also uses social media like Facebook and Twitter to make corporations listen to the problems being faced by their customers. In this way, Groundswell appears to be advantageous to most people (Frazier 82).

The marketing strategy for groundswell should not only create group pages on the Internet and social media but also use them to create long-term customer relationships.

Moreover, the relationships should be based on the selling price and customer acquisition. The strategy should also convert the social opportunity created by the groundswell into marketing advantage by incorporating the community into their network (Frazier 83).

The main effect that e-commerce has on groundswell revolves around information. E-commerce allows different individuals to collect information online and use it accordingly. It also enables organizations to keep 24 hour contact with their customers as they can send new promotions and updates.

The online business is essential since business owners can make their customers visit their businesses regularly through Internet (Li and Bernoff 6).

China and its Businesses

The major strength of China lies on its ability to develop products that can be purchased by every consumer including the low income earners. The country exclusively applies renovation model to develop it companies and businesses. However, the country does not have originality in its technological innovation.

It keeps on borrowing knowledge from other countries and multinational corporations that operate in it (Collins and Block 182). There are costs and benefits that a country or corporation accrues when it does business with China. The main benefits include properly developed infrastructure and cheap man power.

The drawbacks include cultural barrier and fear of finding a market for products that originate from China due to the negative attitude that most people about them (Saxon 161). The Chinese government plays a vital role towards ensuring that business within and outside the country runs smoothly.

Firstly, the government provides ensures that infrastructures are well develop to support effective transportation. Secondly, the government provides grants and loans to corporations to help them run their businesses. Lastly, the government imports business expertise and manpower (Collins and Block 184).

China presents a number of opportunities as well as threats in the world. First, the country, through its cheaper products, creates competition with the global markets that are beneficial to consumers.

Additionally, the expanding Chinese economy continues to create employment opportunities to the country’s citizens and non-citizens (Yee 39).

However, China may end up monopolizing international markets through the cheap commodities, which it produces in abundance. The U.S. is one of the countries that may be outplayed by China if it continues to the trade in cheaper products in the markets (Yee 43).

Works Cited

Collins, Robert, and Carson Block. Doing Business in China for Dummies. New York, NY: John Wiley & Sons, 2011. Print.

Frazier, Shirley. Marketing Strategies for the Home-Based Business. Northham: Roundhouse, 2007. Print.

Funk, William, and Richard Seamon. Administrative Law. New York, NY: Aspen Publishers, 2009. Print.

Helewitz, Jeffrey, and Leah Edwards. Entertainment Law. Clifton Park, NY: Delmar Learning, 2003. Print.

Li, Charlene, and Josh Bernoff. Groundswell: Winning in a World Transformed by Social Technologies. Boston, MA: Harvard business Review Press.

Miller, Roger, and Frank Cross. The Legal Environment Today: Business in its Ethical, Regulatory, e-Commerce, and International Setting. Mason, OH: Cengage Learning, 2013. Print.

Rosati, Jerel, and James Scott. The Politics of United States Foreign Policy. Boston, MA: Cengage Learning, 2011. Print.

Saxon, Mike. An American’s Guide to doing Business in China: Negotiating Contracts and Agreements; Understanding Culture and Customs; Marketing Products and Services. Cincinnati: Adams Media, 2006. Print.

Utton, Michael. Market Dominance and Antitrust Policy. Northhampton, MA: Edward Elgar, 2003. Print.

Yee, Herbert. China’s Rise: Threat or Opportunity? London: Routledge, 2011. Print.

The case

The case study is an analysis of the American Telephone and Telegraph (AT & T) Company. The latter firm had violated antitrust regulations and in particular the Sherman antitrust Act of 1890. This law prohibits trusts; it was designed to shift economic power from large corporations. (Ferlix, 2009)

The AT & T Company enjoyed a monopoly of power in provision of its products and services. It was able to achieve this by maintaining ownership of telephone components to purchasers through leases. Long distance telephone services were all under the company. Also, twenty two Bell companies were under AT & T and this meant that local telephone services could be duly controlled. Matters were made worse by the assumption that the company was indeed a natural monopoly. However, a series of antitrust cases brought forward against the company led to the erosion of these premises.

In 1956 Hush -a – phone filed a suit against the company so that it could be allowed to improve the company’s telephones through its products and the courts were in favor of Hash a phone. But perhaps the most significant antitrust case against AT & T was the US vs AT and T case in 1974. Here the US Justice Department put forward a case against the latter company under the assumption that it had violated terms of the Sherman Trust. The court ruled that AT&T had been engaging in anticompetitive behavior and that it had to be broken up. The result of the court’s decision was the splitting up of local operations firms known as Bell. Phone leasing became a thing of the past as the company had to compete with other firms in the market. In the end, the latter company lost its value in phone manufacturing by a whooping seventy percent.

Whether I agree with the decision

I agree with the position of the court because it was able to achieve the major goals of any antitrust regulation i.e. to promote competition. In the process of doing this, it is assumed that consumers will reap the benefit of getting high quality and low prices. Certain mergers tend to disregard these rules and the same may be said of AT & T through its subsidiaries. The splitting up of the company has created a scenario in which other players can get due returns on their investments by competing fairly in the telephone market. The AT & T Company symbolized those huge corporations that grow to such unprecedented levels up to the point where they have excessive market power. This firm was controlling the entire industry and consumers as well as other players were bearing the brunt of such excessive concentration of power in its hands. The Supreme Court was therefore right in making the decision that it made. (Koutsoudakis, 2008)

Whether the government should be more active in keeping markets competitive

Yes, the government should be more active in keeping markets competitive owing to the fact that that the market does possess inefficiencies that make its structure less than perfect. For instance, monopolies tend to dominate their colleagues and this places individuals at their mercy. Economists agree that the most conducive market model is the perfect competition model and the most undesirable one is the monopoly model. Antitrust regulations are designed to curb monopolistic tendencies as they attempt to work towards a model of perfect competition. The government needs to be consistent in applications of these laws. Despite some failures here and there, this does not undermine the necessity of the latter rules and regulations in curbing market domination by large companies such as AT & T and others. At the end of the day, it is consumers’ rights that are being safeguarded through such government interventions.

References

Ferlix (2009). Sherman Antitrust Act.

Koutsoudakis, A. (2008). Antitrust More than a Century After Sherman. Web.

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 don’t 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 product’s aftermarket. Antitrust theorists are also working on a nonprice predation theory, in which a monopolistic firm’s efforts to raise its rival’s 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.

Introduction

Inequality in wealth, gender, and race had not been addressed before the beginning of the 20th century. Before this, research was scarce and did not give the full picture as to why certain empires struggled or failed. However, numerous assumptions and facts allow us to connect them. According to some sources, the reasons behind the inequality in wealth and power in ancient empires is not mere monopolies. Population increase and particularly regressive economic regimes are potential contributors to the causes of rising inequality.

Discussion

The first reason for the growing disparity in empires is the fact that the population increased incessantly. For example, it was estimated that there were just a million people on the planet before farming began establishing itself in numerous regions in about 10,000 BCE (Lajoux & van Biljon, 2020). However, between 300 and 400 CE, there were almost 60 million citizens living in the entire Roman empire (Lajoux & van Biljon, 2020). In Rome alone, the capital of the empire, the population throughout the first and second century CE is typically estimated at one million people (Lajoux & van Biljon, 2020). In this sense, it was hardly possible to support each individual. Moreover, economic states and policies played a vital role in wealth and power disparity. For example, the Han Empire struggled to keep its hold on power due to such issues. By 100 CE, taxes had become an increasingly serious issue (Lajoux & van Biljon, 2020). The ruling classes, who held vast properties, gave less of their wealth and resources to the kingdom, even though local farmers had the most reliable revenue base (Lajoux & van Biljon, 2020). As a result, while some groups of the realms became richer, others struggled financially due to inadequate financial systems.

Conclusion

Hence, rising inequality may be influenced by factors including population growth and particularly regressive economic systems. The first factor was contributing to the rising demographic imbalance across empires. In a comparatively short period, there were 60 million individuals in the world, growing from a million. Economic conditions and policy also greatly influenced the difference in wealth and power. While some groups in the realms prospered, others faced financial hardships as a result of a weak financial system.

Reference

Lajoux, A. & van Biljon, P. (2020). Making money: The history and future of society’s most important technology. De Gruyter.

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 people’s 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 government’s 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 Roosevelt’s 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.

Monopoly is an economics term, used to mean an organisations operation in a certain sector as a sole producer; the singlehood in production makes the firm have control over a particular product or service. Sometimes the product produced may be for the public or may be a business with an advantage that gives it superiority.

One way that monopolies diversify their operation is through mergers; after a merger, there is an effect to the firm and the public (Sweezy, 2004). This paper discusses the effects of monopolies mergers; it will argue from the firms and consumers perspective.

Importance of competition among firms

Competition among firms keeps the firm on its toes as it tries to enter and remain competitive in the market. To win persuade a consumer buy a company’s products and probably win their loyalty, a company’s products need to stand out in the market. to stand out, then a company need to develop efficient processes and develop its products with time. Competition thus assists a company to:

• Devise, develop, and implement market responsive strategies
• To utilize resources effectively
• To gauge its level of competitiveness and probably develop strategies to increase competitiveness
• It creates the urge and drive to innovate and invent processes and products
• It improves customers care service that may in turn lead to customer loyalty.

Competitive environment and the society

When firms are competitive, the society stands to benefit however; some level of competitiveness injure consumers. The major benefits that societies stand to benefit are:

• Increased choice of products in the market
• Competitive prices
• Efficient utilization of resources
• High quality products as firms come-up with different combinations to win their favour

At very high competition, customers suffer from:

• Chances of low quality products as firms compete for the market, they may tamper with quality of the products to have cheap inputs

High degree of market concentration and the society

When the market has a high degree of concentration of firms, their competition is high; they will devise new method of utilizing the available resources. Efficiency in the industry will lead to reduced commodity prices and better commodities to the consumers. According to allocative efficiency theory, for a perfect competition to occur, there must be optimal distribution of goods and services, the consumers have a wide variety of choice to level that price equals the Marginal Cost (MC) of production, when there is a high degree of market concentration, then the society stands to benefit. It is a way to perfect market situation however; society may suffer if firms are not ethical thus opt to have low quality materials in their products so as they can sell at less price.

Can Oligopoly market structure and both consumers and businesses (forging common standards in industries that experience rapid technological change)

Scientific invention and innovation has resulted to an increase in technology; when firms embrace appropriate technologies, they stand to benefit. Consumers on the other hand benefits from technologies implemented by firms. When oligopoly markets forge common standards, then they benefit from a similar platform of operation thus enhance favourable competition among them. They will have a reference point to gauge their services or products and respond appropriately if they fall below the expected level.

Consumers stand to benefit from standardized oligopoly markets; they will be given high quality services and goods. Standardisation will also discourage chance of un-ethical players in a particular industry (Ruzo, Barreiro & Losada, 2006).

Conclusion

Competition is beneficial to firms and consumers; it leads to high levels of efficiency and consumer severity. In free markets, competition results to maximum utilization of available resources. The negative side of competition is that it is likely to encourage unethical behaviour as firms compete for consumers.

References

Ruzo, E., Barreiro, J. M., & Losada, F. (2006). Competitive market analysis from a demand approach. International Journal of Market Research, 48(2), 193-236.

Sweezy, P. M. (2004). Monopoly Capitalism. Monthly Review: An Independent Socialist Magazine, 56(5),78.

Monopoly is a situation where there is only a single seller of a given product (a good or service) in the market (Sharkey, 1998). It emerges when the product has no close substitute. The government policies on monopolies such as prohibition, permitting or regulating activities usually affect businesses and society as a whole (Geddes, 2000).

Monopoly has two extreme cases namely pure monopoly and pure or perfect competition. According to Posner (1999), pure monopoly is when one company controls completely the supply or sale of a product with no close substitute. Pure or perfect competition on the other hand occurs when there are several sellers of identical products in the same market (Posner, 1999).

Natural monopoly

Natural monopoly is a circumstance that occurs in the market when the average cost of production reduces as compared to relevant range of product demand (Sharkey, 1998). The relevant range of product demand is whereby the average cost curve falls below the demand curve making it is cheaper for a single large firm to provide for the market as compared to multiple smaller firms (Mckenzie, 2008).

The government intervention is therefore necessary failure to which such markets would naturally turn to monopoly exploiting consumers through high pricing and limiting supply.

Government-granted monopoly

This is a form of monopoly whereby the government provides exclusive opportunity to a firm or private individual to be the only supplier of good or service to the market (Sharkey, 1998). In such a market potential competitors are barred through legislations that are enforced by the government as patent, copyright and trademarks (Geddes, 2000). The current monopoly in the Unites States of America is the United States Postal Service.

This is an independent agency of the government. It was established in 1971 to solely provide postal services in the America.However, the first postal service in America was established in February 1692 through a grant from King William and Queen Mary to Thomas Neale to initiate a body that would receive and dispatch letters in the colony (Sharkey, 1998).

The agency is currently administered by Board of Governors who establishes policies, procedures and rates that are applied in all services provided. The United States constitution has given the congress the authority to make laws that regulate delivery of mails thereby creating government-granted monopoly as the competitors are barred(Mckenzie,2008).

Impacts of Postal Service monopoly in United States of America

This monopoly has had several adverse effects on the consumers of the services offered by the agency. To start with, it has led to the existence of low quality services as mails are sometimes mishandled hence getting torn as well as recording high number of mails getting lost.

Secondly, it has led to constant increase in prices of postage stamps and other delivery services leading to the emergency of other companies such as the United Parcel services. Similarly, monopoly has led to slow advancement to technology within the sector as old methods of mail delivery are still applied such as use of motor vehicles instead of planes. This is evident as the agency has taken long to embrace technology as noted in 2007 through adoption of electronic postage payment methods.

However, being a government granted monopoly, the government provides incentives to the agency to stabilize prices of mailing and stamps (Sharkey, 1998). The stamp copyright and reproduction act has also helped the agency to reduce forgery and unhealthy completion hence being fore ahead of their emerging competitors.

Several professional economists have accused the agency of limiting supply. Rick Geddes argued that rural customers not able to get the goods due to lack of competition and are likely to pay more if goods are taken to them. Secondly, they argue that the government should award competitive contracts to private firms to provide the same services so as to reach all citizens (Geddes, 2000). This would uphold the notion of fairness through elimination of cross-subsidy that makes citizens reside in areas in which these services are found.

In conclusion, monopoly is considered an evil of economic development and enjoyment of customers’ rights. The government intervention in the provision of goods and services therefore ensures these rights such as stable prices, adequate supply are achieved Posner, R. (1999). Pressure groups and the human right agencies have spearheaded calls by government to intervene in cases of natural or government-granted monopolies.

References

Mckenzie, R.B. (2008).How market power fosters creativity production. Loss Angeles: Prentice Hall.

Posner, R. (1999).Natural monopoly and its regulation .Oxford: Oxford University Press

Geddes, R. (2000).How to solve the problems of the U.S .Postal Services. New Jersey: American Society for quality.

Sharkey, W. (1998).The theory of natural monopoly .New York: Harvard University Press.

A monopoly is a market system where one supplier has command over the whole or nearly the entire market. The supplier therefore has the ability to dictate the market in his favor. The ability to dictate can be on prices, packaging and service delivery among others (Money, 2011). This paper discusses the United States postal service in its capacity as a monopoly.

The United States Postal Service

The United States Postal Service was established in 1775 by the then continental congress. A post master general was named who effectively coordinated the postal services in the interest the Americans’ welfare. The congress then later directed the expansion of the postal service to include the costal and western regions. The expansion of services continued later.

The access to the postal service was enhanced during the mid nineteenth century when the congress lowered the mailing rates making the service more affordable and accessible. This was followed by the introduction of mail deliveries to door steps at absolutely no cost. Another service, the parcel post was introduced by the “post office department” in the year 1913. The postal department was then awarded a monopoly by the congress to protect it from private firms which could selectively provide services on the basis of profitability.

Further legislations have since been made to enhance the service delivery of the department that is currently known as the United States postal service. The postal service became a monopoly under the legislation of the congress. This monopoly was formed by a legislative act and not by any merger. It can therefore be said to have been formed naturally (USPS, 2008).

Impact of the Postal Service on the Market

The postal service has had significant impact in the American market. Its extensive service that handles hundreds of billions of mails in a year has enhanced communication both in the social and economic aspects. The postal service provided a means of communication among entities ranging from mail deliveries to money transfers.

This had an impact of a fostered communication among people and entities especially before other modes of communications like the mobile phones and the internet were widely developed. It has also had negative impacts in its services. There have in the past been outcries over increased postal rates which can be attributed to lack of competition (Gale, 2011)

Being formed by a legislation of the congress, the postal service can be classified as a government monopoly. Government monopolies are those monopolies that are established as a result of legislation passed by a government to protect a given market. In its case the United States postal service was established as a monopoly to protect it from private investors who would be selective in service delivery with profit as the guiding factor and not provision of the necessary services to people (USPS, 2008).

The postal service can be seen to have an extensively distributed network all over the United States. The supply of its services is therefore not limited as one of its legal mandate is the service delivery to the citizens (USPS, 2008).

Geddes explains that as any state owned monopoly, the postal service at times offer prices that are bellow reasonable in order to force private competitors out of the market. This can be done even if its net effect is a loss to the state cooperation (Geddes, 2003). The postal service does not directly discriminate on prices but had in earlier years been accused of indirect discrimination of offering specialized services to second class mailers at no extra charge (FTP, n.d.).

References

FTP. (n.d.) Post Office. FTP Resource. Retrieved from: web.

Gale. (2011). United States Postal Service. Business High Beam. Web.

Geddes, R. (2003). Opportunities for Anticompetitive Behavior in Postal Services. American Entreprise Institute for Public Policy Research. Retrieved from: http://www.aei.org/

Money. ( 2011). Monopoly. Money Terms. Retrieved from: https://moneyterms.co.uk/

USPS. (2008). Universal Service and the Postal Monopoly. United States Postal Services. Retrieved from: https://www.usps.com/

Introduction

The business world has become very competitive and this has forced many companies to look for ways to be ahead of others in the market. They have adopted various strategies like advertisements, trade fares and exhibitions, gifts, after sale services and offering huge discounts on their goods and services.

However, all these mechanisms have been adopted by almost all companies and this makes the competition to gain great momentum. This has led to some of them adopting the use of monopoly in order to stay ahead of other companies in the market. This research paper outlines the various factors that relate to the issue of monopoly.

Monopoly is a practice that involves a company taking charge of the production and distribution of a particular good or service to the consumers. The company is given the sole right of this process by the state and no other company is allowed to offer such services (Orbanes 12). Whenever a company is given this opportunity, it enjoys all the market demands since there are no other companies to compete with and production costs become very low.

Monopoly occurs as a result of two main forces that necessitate companies to specialize in this practice. The most common way through which a monopoly is founded is through government enforcements by legislation of policies that outline how the companies in question will operate. The government may decide to monopolize a company due to a number of reasons.

First, when a company or institution deals with the provision of very sensitive commodities or services that may threaten the states security when left under the control of private owners or many companies. These services include printing of currency, training of military personnel and provision of arms and ammunitions. Secondly, when the services provided are very basic and essential for survival for example, the provision of national identification cards, voters cards and registration of births.

Furthermore, when the existing companies continuously exploit the consumers through provision of substandard goods and services or when they offer very high rates and costs for their services and goods. In addition, monopoly can be achieved when a company makes very impressive steps that attract a greater percentage of the market. Consumers will always be tempted to believe such companies are the best in the market while others are just participators (Acemoqlu 43).

Whenever a company enjoys the greater percentage of the market there are very high chances that this will force other upcoming and struggling companies to shut down leading to very few companies remaining to offer the services. Therefore, monopoly can be achieved through self growth and expansion of a company depending on the success of the strategies adopted to market their goods and services.

The degree of monopolization usually varies from country to country and various companies have different levels of penetration in the market. There are two types of degrees of monopoly by companies in various countries and these are absolute and partial monopolies.

Absolute monopoly occurs when a company decides to take charge of all the processes involved in the production and distribution of goods or services. In this case, there is no other company allowed to participate in the production or distribution of such services or goods. In many countries absolute monopoly is evident in the provision of military services and supply of electricity. This is always necessitated by the sensitivity and the nature of risks involved in the production and distribution of the said services.

Partial monopoly occurs when a company takes a specific part of the production and distribution process of goods or services. This is usually common when a country wants to privatize some of its operations and still maintain the basic elements of the processes.

This type of monopoly is also evident when a company ventures in an activity that requires a lot of capital that can not be raised by a single company hence, necessitating the need to merge with other companies to provide the services. In this case a company may decide to monopolize the production process and delegates the distribution processes to other companies.

Sometimes companies achieve temporary monopoly in markets after the government grants it to them. Sometimes there are services that are essential for human survival but the government feels its operations are not being done well. In this case such operations are delegated to the private sector through a process of privatization to improve their efficiency (Kennedy 71).

Some countries use this process of partial monopolization to attract investors to their countries and boost developments in areas that were underdeveloped. In other occasions a country may be having insufficient funds or technology to exploit its natural resources and therefore, offers temporary monopoly to companies that are very experienced and economically stable. Such operations include oil exploration and tourism industry.

Monopoly has its own shares of advantages that make it very applicable in many instances. One of the greatest advantages that come with monopoly is specialization in the provision of goods and services. Specialization leads to innovations and inventions of the best ways to provide goods or services. Such commodities are usually of high quality that corresponds with what consumers pay.

Secondly, monopoly eliminates an unnecessary competition that usually puts the consumer’s health at risk. This is due to the fact that whenever there are unhealthy competitions producers usually forget the quality of what they produce as their attention is fixed on how to increase sales at the expense of other factors.

Monopoly also ensures that essential services are offered throughout the year and eliminate hording of commodities. Monopoly also helps to promote local companies to develop and this encourages local investments. However, despite these advantages of monopoly to the government and consumers, it has its shares of disadvantages. The most outstanding shortcoming of monopoly is the possibility to compromise the standard of goods produced due to lack of competitors in the market (Coe 132).

Monopoly discourages other smaller companies from developing and therefore hinders developments as new entrants in the market fear stiff competition from well established companies. Lastly, in the event that a big monopoly company collapses due to unavoidable reasons it becomes difficult to fill the gap left as the market demand is usually very high.

Some companies that have achieved monopoly include the Armco Company that has enjoyed being a lone ranger in the oil sector since its establishment. The AT and T merger with T-Mobile is also geared towards enjoying monopoly in the near future should their association bear fruits. Google Company had also enjoyed immense control of the online market until Microsoft Company came in and threatened its monopoly.

Conclusion

Monopoly is as good as the company that has the mandate of provision of these services. However, monopoly should be guided by professional, legal and social ethics in order to ensure they use their market influence in a positive manner.

Works Cited

Acemoqlu, Daron. Why Nations Fail: The Origins Of Power, Prosperity And Poverty. New York: Crown Business, 2012. Print.

Coe, John. The Fundamentals of Business – Business Sales and Marketing. New York: McGraw Hill, 2003. Print.

Kennedy, Rod. Monopoly: The Story behind the Worlds Best Selling Game. New York: MJF, 2006. Print.

Orbanes, Philip. Monopoly: The Worlds Most Famous Game. New York: Da Capo Press, 2007. Print.