Business Monopolies

monopoly

monopoly (mənōp´əlē), market condition in which there is only one seller of a certain commodity; by virtue of the long-run control over supply, such a seller is able to exert nearly total control over prices. In a pure monopoly, the single seller will usually restrict supply to that point on the supply-demand schedule that will maximize profit. In modern times, the accelerated production and competition brought about by the Industrial Revolution led to the formation of monopoly and oligopoly. Since the notion of monopoly is antithetical to the free market ideal, it has never been popular in capitalist nations. In the United States, the most famous monopoly was John D. Rockefeller's Standard Oil Trust in the late 19th cent. Despite such legislation as the 1890 Sherman Antitrust Act (the first significant legal statute against monopoly), it was the Supreme Court that forced the break-up of Standard Oil, along with other monopolies. Since the 1960s, however, the U.S. Justice Dept. has occasionally been more active in attacking monopolies or near monopolies (such as AT&T and IBM); a major case in the 1990s involved the Microsoft Corp. (see Bill Gates).

Many governments, however, have created public-service monopolies by laws excluding competition from an industry. What resulted were generally publicly regulated private monopolies, such as some power, cable-television, and local telephone companies in the United States. Such enterprises usually exist in areas of "natural monopoly," where the conditions of the market make unified control necessary or desirable to the public interest. Some socialists have advocated the extension of the principle of public monopoly to all vital industries, such as coal and steel, that have an immediate effect on the general welfare of the economy. By the 1990s, however, many public utilities in the United States and elsewhere were deregulated, allowing for competition and lower prices (see utility, public).

Aside from utility companies, privately controlled monopolies without state support are rare. However, the concentration of supply in a few producers, known as oligopoly, is not uncommon. In the United States, for instance, several large companies have dominated the automobile and steel industries. Since the Progressive era, the U.S. government has made most forms of monopoly, and to a lesser extent oligopoly, illegal under antitrust laws. The objective of such measures is to guarantee that price will be determined by market forces rather than by arbitrary price setting among corporations. In recent years oligopolies have grown through mergers and acquisitions. The government still grants temporary monopolies in the form of patents and copyrights to encourage the arts and sciences.

See J. Robinson, The Economics of Imperfect Competition (2d ed. 1969); D. Dewey, The Antitrust Experiment in America (1990); T. Freyer, Regulating Big Business: Antitrust in Great Britain and America, 1880–1990 (1992).

The Columbia Encyclopedia, 6th ed. Copyright© 2014, The Columbia University Press.

Business Monopolies: Selected full-text books and articles

In Defense of Monopoly: Market Power Fosters Creative Production By McKenzie, Richard B Regulation, Vol. 32, No. 4, Winter 2009
Defining Better Monopolization Standards By Elhauge, Einer Stanford Law Review, Vol. 56, No. 2, November 2003
Politicized Economies: Monarchy, Monopoly, and Mercantilism By Robert B. Ekelund Jr.; Robert D. Tollison Texas A&M University Press, 1997
The Antitrust Revolution: Economics, Competition, and Policy By John E. Kwoka Jr.; Lawrence J. White Oxford University Press, 2004
Natural Monopoly and Its Regulation By Richard A. Posner Cato Institute, 1999
The Uncertainty of Monopolistic Conduct: A Comparative Review of Three Jurisdictions By Berry, Mark N Law and Policy in International Business, Vol. 32, No. 2, Winter 2001
The Antitrust Religion By Edwin S. Rockefeller Cato Institute, 2007
Librarian’s tip: See especially Chap. 5 "Monopolization"
The Monopoly Power of Multinational Enterprises in the Service Sector of a Developing Country By Gelan, Abera The Journal of Developing Areas, Vol. 42, No. 2, Spring 2009
Durable-Goods Monopoly with Privately Known Impatience: A Theoretical and Experimental Study By Guth, Werner; Kroger, Sabine; Normann, Hans-Theo Economic Inquiry, Vol. 42, No. 3, July 2004
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