• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Compare and contrast the various methods of dealing with the problem of monopoly.

Extracts from this document...


"Compare and contrast the various methods of dealing with the problem of monopoly." Legally, a working Monopoly is defined as a firm which controls 25% of their market. This immediately raises problems, within the measurement of market share, and the definition of their market. Microsoft is a considerably well known monopoly (as a whole), but is this the case for all areas of business? This would be the initial problem: determining their market. Microsoft spans a vast spectrum of business, however, virtually breaking into distinct main markets - Desktop and Server. It is clear that Microsoft dominate the Desktop market, far outselling any near threats, but is this the case for the server market? I have broken down the server market into two main areas - the Operating System itself, and the web based server. Operating System Percentage Share Linux 31.3% Microsoft Family 24.3% Server Software Percentage Share Apache Foundation 56% IIS (Microsoft) 24% According to the definition, Microsoft is not technically a monopoly in both 'markets'. However, as Microsoft can be accepted to live within a single market (computing), they would have a clear monopoly. Consequentially, problems of dominance begin to occur. It has been discovered that they have been abusing their market power by forcing small firms into signing contracts that require them to purchase their software, should they be using their hardware. ...read more.


who sells the gas to business and domestic users would be separated from Transco who manage the actual gas pipelines. This would lower the barriers to entry (sunk costs) for new firms, as they would not have to 'produce' the gas, nor have it routed to their customer's homes. They can simply purchase it at a wholesale rate, and sell that on with a margin for profit. - Other countries have adopted a different method for regulating monopolies, called 'Rate of return' regulation. This is where companies are taxed a percentage of their profits, however this has similar problems. As there is no price ceiling introduced by this method, the monopolistic firm(s) may choose to simply increase their prices in order to cover the additional tax. This actually solves no problems, and leaves the consumer worse off, as they would be faced with paying higher prices. As the market is dominated by the few single firms, it may leave the consumer no choice but to purchase their goods from those single or sole suppliers at the higher cost. The competition commission also has a strong say on mergers, whether or not they are permitted to go ahead, if there is a threat to the market of a monopoly. An example of this was the Halifax Bank of Scotland and Lloyds TSB merger which resulted in a monopoly for the merged company of the mortgage market - over 30% market share. ...read more.


However, should the market be deregulated - for example, if Thames Water sell the water a wholesale price (such as British Gas does with Gas) then additional firms can afford to enter the market with lower barriers to entry. Finally, there is information asymmetry, where the existing firm has the experience and the knowledge about the industry that allows them to be more productive and drive down their costs. If the information is not known to the new entrants, this can be a sunk cost for them, acting as yet another deterrent for entering the market. However, having discussed the problems that monopolies may bring, the reverse can be true. Monopolies can be beneficial to a market because they achieve greater economies of scale, and tend to have a lower market price than smaller firms - as they are more able to pass on cost reduction. A typical example of this would be the comparison of a monopolistic firm such as Tesco against Jay's News. A typical product, one pint of milk will cost around 49 pence in a small firms shop, or 26 pence in Tesco. At a 53% saving, it seems clear that monopolies can benefit the greater economy. Sources: NTL Price Capping: http://www.ofcom.org.uk/static/archive/oftel/ind_info/broadcasting/ntlprice/section2.htm Page 4 of 4 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Macroeconomics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Macroeconomics essays

  1. Pakistan is in the grip of a serious energy crisis that is affecting all ...

    bed sheets exports declined by 9 percent and garments exports slumped by 20 percent due to 18 to 20 hours load shedding of gas and electricity as major factors. Effects on export orders: there was 40 percent shortfall in the exports because USA and European countries were the major buyers of Pakistani products.

  2. Budget 2004-05 and Economic Analysis of Pakistan

    Pakistan has over 19.3 million Housing units in the country. About 24.8 million Housing units for a population of 148.7 million people are required. Hence, a shortfall of 5.5 million homes is estimated as of end June 2004. A number of measures have been taken by the Government for reviving

  1. Economics of the airline industry

    Most of them were making less than ten dollars per hour. Due to such major pay disparities, some states passed living wage ordinances to move towards resolving this problem. This low pay also results in a shortage of people taking the positions or people leaving the positions to obtain positions with higher pay.

  2. Unemployment: Where is it Going?

    These facts are proved by the report prepared by the Shura Council's Human Resource Committee that predicted the labour force would reach twenty two million by the year 2002 (Farag 1). Those statistics show that the Egyptian job market is not capable of absorbing all the unemployed labour force.

  1. Economics - House Prices.

    So these are the main things that affect the price of a house, but I think that unemployment is the major factor affecting the price of a house. I will now talk about why I think unemployment is the main thing that affects house prices, I will compare the price

  2. Governments set economic objectives - Discuss the relative importance of each of these objectives ...

    Due to a fall in real wages, people begin to drop out of the labour market, therefore moving the point Y to PC3 at point C, where unemployment is back to its natural rate, but with the consequence of a permanent increase of inflation to 10%.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work