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One dominant seller controls all or most of the market’s product, and there are barriers to entry that keep other companies out. Seller has the power to set quantity and price Of its products on the market. Seller can extract monopoly profit by producing less than equilibrium quantity and setting price below demand June but high above supply curve. High entry barriers keep other competitors from bringing more product to the market. Ethical Weaknesses of Monopolies Violates capitalist justice. – charging more for products than producer knows they are worth Violates utilitarianism. Keeping resources out of monopoly market and diverting them to markets without such shortages – removing incentives to use resources efficiently Violates negative rights. – forcing other companies to stay out of the market – letting monopolist force buyers to purchase goods they do not want – letting monopolist make price and quantity decisions that consumer is forced to accept Oligopolies Markets Defied notions Major industrial markets are dominated by only a few firms. Oligopolies markets are “imperfectly competitive” because they lie between the two extremes of the perfectly competitive and monopolistic markets.
Unethical Practices in price-fixing Manipulation Of supply Market allocation Bid rigging Exclusive dealing arrangements ?? Tying arrangements – Retail price maintenance agreements – Predatory price district nation. The Fraud Triangle The pressures or strong incentives to do wrong, such as organizational pressure, peer pressure, company needs, personal incentives The opportunity to do wrong, which includes the ability to carry out the wrongdoing, being resented with circumstances that allow it, low risk of detection The ability to rationalize one’s action by framing it as morally justified.
Main Views on Oligopoly Power Do-nothing view. – Do nothing since power of oligopolies is limited by competition between industries and by countervailing power of large groups – Oligopolies are competitive and big U. S. Companies are good international competitors. Antitrust view. – Large monopoly and oligopoly firms are anticompetitive and should be broken up into small companies Regulation view. ?? Big companies are beneficial but need to be restrained by government regulation.