Monopolies

5 Pages 1282 Words

The corporations of today are much different than the corporations of ten years ago. Corporate mergers, which occur every month, are creating threatening giants, and companies going to court for years at a time battling over the same issue “are they a monopoly or not”? IBM merged ten years ago and Microsoft is merging right now. In order to come to a conclusion on this decade old question, you first must know the facts about what a monopoly is and what it takes to create one.
What constitutes a monopoly? One more of the following elements must be present: (1) control of a major resource necessary to produce a product; (2) technological capabilities that allow a single firm to produce at reasonable prices all the output of a particular commodity or service; (3) exclusive control over a patent on a product or on the processes used to produce the product; (4) a government franchise that awards a company the sole right to produce a commodity or service in a given area. Edwin Mansfield, a political scientists, said, “for a monopoly to be effective there must be no practical substitutes for the product or service sold, and no serious threat of the entry of a competitor into the market” (23). This enables the seller to control the price.
In the late 19th century the tendencies inherent in a free competitive economic order brought about new changes. In Great Britain, the United States, and other industrial nations, giant business firms began to emerge and dominate the economy. In part, this stemmed from the empire-building tactics of the captains of industry, such as the American entrepreneur John D. Rockefeller, who drove most competitors from the field. It also came about because of technological advances that enabled a handful of large firms to satisfy the demand in many markets. The result was not a complete monopoly but, rather, an economic order known as oligopoly.
From the late 19th century onward, the U.S. has attempt...