EL asked in Social ScienceEconomics · 1 decade ago

Monopolies and Oligopolies?

Hey everyone! Just need a help with a Economics question ...

How can people be protected from Monopolies or Oligiopolies?

Thanks in advance!

1 Answer

  • 1 decade ago
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    Some people would say government anti-trust regulation. The Federal trade Commission is charged with preventing situations which "have the potential to impede" competitive markets. why this doesn't happen is that it take a lot of resources to demonstrate that a firm's or firms' actions are doing just that.

    In high technology environments, some economists hold that monopolies aren't so bad since they provide an incentive for entrepreneurs to take risks to develop new technologies which benefit us all. Moreover, allowing these monopolies to exist provide incentive for new innovative entrepreneurs to create improved services and products which destroy the incumbent's monopoly. In this case, we can be protected from monopolies by fostering new businesses with new ideas. Schumpeter was a big proponent of this.

    If you think about it, right now the government is in the process of trying to save an oligopoly and says nothing about trying to foster new automobile companies that don't have legacy costs and outdated organizational mentalities. Economist Paul Romer wrote in the Wall Street Journal a similar criticism about the government's preservation of the failed banks. He suggests they should foster new banks without faultily priced assets (ie toxic assets) so that we can have a competitive financial market.

    Protection from monopolies comes from a government that is not trying to save its favorite businesses by protecting them from better alternatives.

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