When might society decide to allow a monopoly? Providing examples, explain what would happen if all markets were oligopolistic. What are the upsides and downsides of a monopoly ?
A society may allow monopoly if they have adequate trust on associated products or services which they feel represents them and effectively tackles their needs. Secondly, society might allow for a monopoly to regulate competitors and ensure quality products and services are rendered at reasonable prices. The move to monopolize a market may help society tackle environmental and sociopolitical issues e.g. pollution from machinery and industries. Oligopolistic markets would increase interdependence among competitors leading to similarly equal prices for products and services (Hawley, 2015). For example, if all airlines became oligopolistic, then ticket prices for regular flights and other exclusive packages would be constant throughout the year and all strive to increasing travel safety and consumer satisfaction. However, sometimes firms may act together to concentrate earning and limit industry expansion through collusion. On the other hand, monopolies with strong society connection may help develop communities through increased quality, production and financial foundations. However, monopoly may limit innovation, industrial expansion and consumer access to vital information. Limited competition may result in manipulated scarcities (hoarding) and development of substandard products and services.
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Collusion does not happen often. Domino's and Pizza Hut are legendary competitors. They spend a lot of money to grab each others customers. Why isn’t there more collusion? Apply an economic perspective to your response.
Collusion would necessitate two firms such as Domino's Pizza and Pizza Hut to agree on products to sell, preparation techniques , ingredients and final prices of their pizza. Collusion is illegal as it hinders socioeconomic development and overt collusion end up forming a cartel. The two firms engage unlimited resources in developing customer-friendly services and products to maintain brand image and cultivate independence. So, being long-term rivals would place the public in economic risk if they collaborated in collusion. Quality and price would become compromised at the expense of the firms too risking their income and future interests (Asker, 2018).
References
Hawley, E. W. (2015). The New Deal and the problem of monopoly . Princeton University Press.
Asker, J. (2018). Introduction to Collusion and Cartels
