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Monopolies are not an issue for the economy, the consumer, or the producer. As Dr. Per Bylund discusses, a business being considered a monopoly is not an inherently bad thing, as it simply means that it is the singular provider of a good or service. Standard Oil, perhaps one of the most famous American monopolies, was nothing but beneficial for all parties and yet it was broken up under the antitrust act. In reality, monopolies force innovation and pave the path to a better market for consumers. Monopoly theory is based on flawed logic that can only be applied in a vacuum and is in truth not applicable to a free economy.
Regulation is the enemy of the consumer. A monopoly, or any strong group of industry leaders, only holds power over the consumer for an extended period when regulation interferes. Dr. Per Bylund gives the example of utilities providers, who are able to charge prices that the majority of consumers are unhappy with because regulations prohibit competitors from being able to offer lower prices. A business can be a monopoly, but without regulation in place to protect them they have to continue providing a service worthy of that monopoly. Imposing regulations on an industry enables businesses to hide behind those regulations while providing a product undeserving of a monopolistic status. Without barriers to competition, entrepreneurs are free to enter the industry and provide alternatives to the consumer. Provided these newcomers offer a better alternative, then the consumer benefits because they either accept this alternative or the established monopoly is forced to adjust their prices and services to actually be competitive.
Further, aside from the examples provided during the lecture by Dr. Per Bylund, Standard Oil serves as an example of how beneficial monopolies can be. Standard Oil bought out the vast majority of the competitors in the market by heavily undercutting their prices, giving them the option of either matching their exceptionally low prices and making less money or selling their business to Standard Oil. Rockefellers increase in his share of the petroleum market directly correlates to a significant decrease in the price of oil at the time. Not only was Standard Oil providing customers with far cheaper oil than competitors, but as the company grew more jobs were created. In addition, Standard Oil’s strategy of undercutting its competitors to drive them out of the market carried significant risk, if they held out for long enough then Standard Oil would eventually run out of money to sustain itself. Antitrust laws are a convenient cover for the government to pretend they are protecting the American public from monopolies while conveniently allowing for highly regulated fields like public utility and the medical industry to foster monopoly power.
As Dr. Per Bylund describes during the lecture, there is no inherent issue with having a singular seller. He provides an excellent example in Apple and their temporary monopoly on the smartphone. They revolutionized the mobile phone industry and provided a more desirable product to consumers, which forced other manufacturers to follow suit. With no regulation to inhibit competition, other manufacturers were free to emulate the iPhone and produce their own smartphones which in turn ensured that Apple would continue to produce a better product. Although Apple had produced the first successful smartphone and held a temporary monopoly on the smartphone, it was not as though they could charge an unreasonable amount for their product because you could simply decide not to purchase it and instead opt for a different less advanced phone. As previously stated, the only way they could hold any power with this monopoly would be if regulations were implemented on the industry that protected them and stifled competition.
Monopoly theory would lead one to believe that if a singular company is allowed to become the sole provider of a good or service, that the consumer will suffer because of a lack of competition. However, this theory is flawed because it assumes that a monopoly could charge unreasonable prices due to a lack of competition. However, doing so opens the door for new competitors to undercut them and thereby dismantle their monopoly. The issue of monopoly power is not the monopoly itself, but the power given to that monopoly by excessive regulation on the industry. People will naturally gravitate toward the best product, best price, or some combination of the two. If a monopoly provides this until a competitor can find a way to gain a competitive advantage and provide even more adequately for the customer, then there is no issue. Some point out that a lack of options is a problem with monopolies, but this isn’t true either, as if a monopoly were to provide too few options then competitors would arise naturally to provide those options if consumers desired them enough. Essentially, natural competition under a free market will always ensure that consumers are provided with the best options, regardless of if it is coming from a single company, two companies, or many different companies.