What is monopoly power? It is the ability for a company to dominate the market they are in and have control over their prices and product quality. Some companies get to set a bar for their services and product without the worry of a new competition entering the market which is what can lead to true monopoly power. The worry for people is the loss of the competition because that is when prices go way up. Without any alternative option the company can overcharge customers and not always be required to offer the most top-quality product or top service. Not all monopoly companies can be negative though. There is still a need for the right kind of monopoly companies which I will further discuss in the rest of this paper.
The Iphone and Monopoly
Dr. Per Bylund talked about the evolution of landline phones, to flip phones, to now having the iPhone. When the iPhone came out that was an example of a monopoly company. Apple had control over that market for some time until it began to spark innovation in other companies. Apple first launched the I-phone in 2007. It was the first device to offer a lot of new customizations that the flip phone does not have. It bundled the internet, the features of an iPod, and the necessity of an iPhone all into one. Apple didn’t have the opportunity to turn into a negative monopoly powered company because it was in a market that other entrepreneurs could also try this new creation and develop it in their own way.
Why Monopoly Companies Are Good
Monopoly companies are not always a negative thing but can be a necessary thing. There must be the one who can step out of the box and create the innovation of a product or service. They can encourage their competitors to also rise to these new opportunities. If they see that a product was given too high of a price or that its quality could be improved, they can swoop in with a better-quality product and lower prices. This means they could win over the majority of consumers from the original company. If the original company is able to create and maintain a positive price and quality, they can remain the “top dog” company.
The Negatives of Monopoly Power
Even though there are some positives to Monopoly companies, there is still the potential for it to be negative. In the lecture video, Dr. Bylund discusses how utility companies are limited in numbers by the government, therefore whatever utility company is in your town is the option you are stuck with choosing for whatever needs you may have. These kinds of markets are not open to new entrepreneurial ideas. Since these companies do not have any competition, they have the opportunity to take advantage of monopoly power. This means they can overcharge for the services they provide or the product they sell. Even though this is the only option you have access to use, does not mean it is the highest quality or the “best” option. This can be unsettling and unfair to the consumer.
Antitrust Laws
Antitrust laws are extremely helpful in preventing a lack of competition in a market. The government contradicts itself in a way by protecting monopoly companies at the beginning and then claiming they grew to be too large of a size therefore splitting them up. In the video Dr. Bylund shares that it would be better if the government instead opened the barriers to that particular market and allowed more entrepreneurs to enter it. They could bring more innovation into the market and bring the competition needed to prevent monopoly power. Antitrust laws are put into place with the intention of protecting consumers from unfair prices and low-quality investments. The goal is to stop a company from developing too great of dominance that they begin to cheat the customers on what they get for what they paid for. Antitrust laws are set in place to keep a fair opportunity for all consumers.
Conclusion
A question I had was is the competition of multiple companies selling the same product with small different details the most efficient way? Why wouldn’t we all just want to go to one place for the product we needed? I believe Dr. Bylund was able to answer this question for me as he talked throughout this video. If there is no competition within the companies, there will be no motivation for continued innovation to keep the consumers happy. Then consumers will be stuck with one option. Entrepreneurs would be affected because they no longer would be given the chance to explore new ideas and test out how well they would succeed in a market. This is why when a company branches off to be a monopoly for a short period it is not negative but rather a good thing. If there is competition companies will better cater to the customer’s needs, they will want to be the most attractive and reliable option so they can bring in more customers which ultimately brings in more money. So, the answer is yes, competition is the best way to sell these products. It benefits both entrepreneurs and consumers.
