Why is monopoly 'harmful? How can regulation ameliorate these harmful effects? What problems confront the regulators?
Date Submitted: 12/27/2004 09:31:46
Category: / Business & Economy / Economics
Length: 3 pages (845 words)
Category: / Business & Economy / Economics
Length: 3 pages (845 words)
In order to deduce that a monopoly is 'harmful', there must be another market system which is preferable to monopoly so as to offer greater benefits to the public. A monopoly can therefore be compared to perfect competition. If the benefits of perfect competition outweigh the benefits of monopoly then a monopoly can be regarded as 'harmful' since the consumers are not receiving the maximum possible utility for their purchases.
Monopolies are criticised for their …
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…government's?(Since the government acts in the public interest, or is supposed to anyway.) Moreover, regulation is very complex and difficult especially with large powerful firms which exert political influence. There is thus a danger of regulatory capture. This is where the regulator is persuaded to operate in the monopolists' interest rather than in the public interest. Regulatory capture may be due to corruption or due to regulators actually believing the managers point of view.
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