Competition Within Political Monopoly Theory
The article Two Theories of Monopoly and Competition: Implications and Applications bases the discussion on the claim that monopoly makes sense on the foundation of the political monopoly theory. In other words, Simpson suggests that monopoly exists only when the government applies force so that one or a couple of firms would have the larger market’s portion (2). The author also states that there is no such concept as perfect competition, supporting his claim by refuting the primary foundations of its definitions. The article suggests that having the same products and many small equal firms, as well as minor barriers to entry, on the contrary, eliminates any competition (Simpson 5). Hence, the concepts of monopoly and perfect competition receive new explanations through the disproof of the broad ideas supported by real-life examples.
Besides, Simpson touches on the concepts of monopolistic competition and oligopoly. The author claims that both oligopoly and monopolistic competitions are based “on invalid views” (Simpson 7). It is proposed that there are no such things as an oligopoly or monopolistic competition, but rather rivalry and political monopolies (Simpson 9). The article provides interesting cases of USPS, Wal-Mart, and Microsoft and also talks about the fact that the way one views whether there is a monopoly in the market is subjective. The dependence of what is a monopoly and competition on the individuals’ perceptions, is shown through the automobile industry example. Consequently, the significant implications in the classification of firms into specific market types are the presence or absence of governmental regulations and individuals’ subjectivism. Moreover, Simpson suggests that also based on individual perception, the companies that would try to differentiate their products and offer something unique can be viewed differently.
The next important point raised in the discussed piece of work is antitrust laws that serve as the legislative instruments to restore competition. However, according to the author, antitrust laws also have invalid foundations and, in contrast, decrease competition. It can be observed through the connection to the explanation of monopoly that, as analyzed in the article, exists when there is governmental interference (Simpson 2). It shows that, genuinely, with the active utilization of antitrust laws, the level of competition is going down. Antitrust laws also play an essential role in the companies’ classification because when there is an applied force within the industry, the company can be classified as a monopoly following the political monopoly theory. One of the examples provided by Simpson is USPS, which is a monopoly because the industry is highly regulated by the government and protected from competition.
The article also talks about the barriers to entry, emphasizing the differentiation between natural barriers and government-imposed ones. The requirements on the invested capital into the new business, brand loyalty, or specific knowledge about production are examples of the natural obstacles. Governmental barriers, in turn, “are achieved through the initiation of physical force” (Simpson 5). Consequently, there is a significant difference between these types of barriers, and it is crucial to consider them while classifying the firm. An article makes a great example of the New York taxi market, where each cab has to possess a medallion priced at more than $400,00. Such a fee represents a substantial entrance obstacle imposed by the government, thus restricting competition.
In conclusion, the article raises numerous curious points and provides a new representation of the monopoly concepts and related aspects. It is possible to say that this article also shows the significance of the examples while writing an Economic paper. Real-life cases help to gain a clearer understanding of the presented issues, definitions, and concepts. Besides, it is crucial to observe the topic from different perspectives to analyze each concept thoroughly and to have proper justification for one’s claims.
Simpson, Brian P. “Two Theories of Monopoly and Competition: Implications and Applications.” Journal of Applied Business & Economics, vol. 11, no. 2, 2010, pp. 1-13.
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