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Mikey Villa
Dr. Gen
Economics
26 June 2014
Monopolies: More Than Just a Game

To children, Monopoly is a board game that causes cheating and mayhem, but it
also teaches kids that power over others is fun. In order to win Monopoly, a player
must dominate the game board, purchasing all the real estate and gain the most
profit through inflated property rentals and sales. For the game to be fun, one
player must monopolize the others and control the game. To the economy, a
monopoly is a dangerous adversary that reigns over the consumers and competitors
in the market. The domination that occurs in the board game Monopoly, takes place
in real time when corporations, businesses, and firms gain profit by monopolizing
the free trade market and earning an unfair profit off of consumers. According to
Prentice Halls Economic textbook, a monopoly is defined as a market dominated by
a single seller (OSullivan and Sheffrin 156). Monopolies have existed in American
society since the colonial period. In order to function early on, colonists looked
toward big businesses to help establish the colonies. Since then monopolies have
included powerhouses, such as Rockefellers standard oil company, Andrew
Carnegies steel mill company, the railroad industry, and even modern day societys
Netflix, Inc., can be considered a monopoly. Monopolies pose a major threat to the
American economy. They are able to bend the rules of the free market system for
selfish reasons that provide little benefits to the consumers, communities, and
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overall free market. Through the stealing of consumers rights, abolishing of
competition, and the unfair raising of prices, monopolies prove that they are in fact
harmful to the American economy.
By taking the power of the consumers away, monopolies demonstrate how they
are harmful to the free market and the economy. One of the luxuries of living in a
free market is the freedom of choice as a consumer. As stated here, free market
economies have the highest degree of economic freedom of any system. This
includes the freedoms of individuals to consume what they want to get (OSullivan
and Sheffrin 32). When consumers purchase a desired product, they are
demonstrating the freedoms guaranteed to them in the market. The more demands
consumers make for a good, the more likely this product is to be produced. This is
called consumer sovereignty. As defined by Prentice Halls Economic textbook
consumer sovereignty is, the power of consumers to decide what gets produced
(OSullivan and Sheffrin 32). The saying the Consumer is King means that the
average consumer controls the market, and this is proven true through consumer
sovereignty. However, when a monopoly controls a market, all these freedoms are
cast away. Because a monopoly only produces one good, they have the ability to
control the entire markets supply and can set prices at whatever rate they deem fit.
Consumers no longer have the choice of deciding which companies goods they
would rather buy. Because there is no competition, a consumer cannot compare
prices between companies products. This is how monopolies destroy consumer
sovereignty. Although the demand for a product might be astronomical, the
monopolies have the choice of how much they will supply and output into the
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market. Because monopolies enjoy a life of isolation in their market, many do not
look to improve their products. In a competitive market, companies look to progress
and perfect their products in any way that will make them more desirable. Since
monopolies have no threats, there is no immediate danger in supplying a lackluster
product. This effect is described, Among the ways in which unregulated monopolies
can harm an economy are by causing lower level of quality than would otherwise
exist. This includes not only the quality of the goods and services themselves, but
also the quality of the services associated with such goods and services (Linfo).
Monopolies see no reason in trying to advance their products. Because there are no
other firms in the market, consumers have nowhere else to buy. This does not give
consumers the chance to buy the best product available on the market because the
monopolies do not always produce the best products they can create. Monopolies
actually find that it would be worse for business to create better products.
Innovation is not as necessary for a monopolist as it is for a highly competitive firm,
and, in fact, it can be a bad business strategy. Research and development by
monopolists is often largely focused on ways of suppressing new, potentially
competitive technologies rather than true innovation (Linfo). Monopolies view
innovations as a way for competitors to join the market. Instead of finding ways to
produce better products for the consumers, they look at ways to limit their products
advancements. This forces consumers to accept the mediocre goods they are sold.
When given chances to advance from research and development, monopolies
choose the opposite path. The Wall Street Journal tells how In the 1930s, AT&T
took the strangely Luddite measure of suppressing its own invention of magnetic
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recording, for fear it would deter use of the telephone (Wu). AT&T chose to limit its
companys ability to improve accessibility for consumers. By limiting their products,
they believed that they severed any chances of other firms finding ways to enter the
market. Monopolies find no remorse in shaping the economy around their needs.
They can choose to hold back technology and bar consumer rights, and in return
keep their magnate status.
Monopolies tarnish the reputation of freedom in the free market by destroying all
chances of competition. Competition is defined by Prentice Halls Economic textbook
as, the struggle among producers for dollars of consumers (OSullivan and Sheffrin
31). Competition is a side affect of open opportunity and self-interest. When
everyone has a desire to find wealth, and they are given the right to fight for this
success in the market system, then competition forms. Prentice Halls Textbook
elaborates more on how self-interest and competition go hand and hand by saying,
Self-interest and competition work together to regulate the economy. Self-interest
spurs consumers to purchase certain goods and services and firms to produce them.
Competition causes more production and moderates firms quests for higher prices
(OSullivan and Sheffrin 31). Competition is more then just a battle for wealth. It is
healthy for the economy. Competition leads to advanced products and better goods.
Because firms want to attract more consumers they build better products and sell
them at lower prices. This keeps everything fair in a competitive market.
Monopolies, on the other hand, destroy competition. By owning the market they
control everything, including the quality and pricing of products. Without
competition, there is no need for monopolies to try and better products. They can
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escalate prices and consumers have nowhere else to turn to buy goods. Markets
with competition move prices closer to equilibrium, the point in which the quantity
supplied and the quantities demanded are equal. This is shown here, under perfect
competition, every economic agent is a price taker and the price mechanism is not
manipulated by anyone. Competition is the best way to ensure the most efficient
allocation of resources and to best serve consumer welfare by providing goods and
services at the most competitive (the lowest) price (Chin). Consumers look for an
efficient product at a lower price. Competition encourages both characteristics. This
is healthy for the economy. Firms make money and consumers receive what they
want. When this cycle is disrupted by a monopoly, it soils the expectation of
satisfactory prices for a sufficient good. Monopolies are motivated by self-interest
but also do not have to worry about a competitive threat. Even the government
struggles in preventing monopoly markets. Showing how much the free market has
changed from the effects of monopolies, Americans can no longer count on open
markets for their ideas and their work. Because of the overthrow of our
antimonopoly laws a generation ago, we instead find ourselves subject to the ever
more autocratic whims of the individuals who run our giant business corporations
(Lynn). Laws such as the Sherman Antitrust Act prohibited certain monopolies
under certain conditions. However, the Sherman Antitrust Act proved to be faulty
and allowed for monopolies to form by sidestepping the rules. By having
monopolies in the economy, it makes consumers and other entrepreneurs second-
class citizens. Entrepreneurs no longer have the open opportunity that is supposed
to be a right in the free market. One of the reasons monopolies are successful at
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keeping other firms from joining the market it because of barriers of entry. Prentice
Halls Textbook says, Barriers to entry are factors that make it difficult for a new
firm to enter the market (OSullivan and Sheffrin 153). Barriers of entry can include
initial development problems. When a firm wishes to join the market they have to
prepare for paying start up costs. These are, the expenses a firm must pay before it
can began to produce and sell (OSullivan and Sheffrin). When start up costs are
high, it makes it harder for a new business to join a market. When a monopoly is
already in the market it makes it nearly impossible. Because monopolies can be
afford to be flexible for periods of time, they can resort to any means for driving
competition out of the market. Once the competition is knocked out then the
monopolies can resort back to their original high prices. This does not allow for any
other firms to have a fair shot in the market to thrive. By diminishing any other
chance of firms to join in on the market, monopolies dominate the economy and
drive a stake directly through the heart of the American free market system.
By raising unfair prices, monopolies are proven to be harmful for the economy. As
mentioned before, one of the beauties of competition is it regulates prices. As
competition for consumers intensifies, firms resort to lowering prices to attract
buyers. When prices reach that certain point, also known as equilibrium, it is an
indication that the market is in fact strong and healthy. Prentice Halls Economics
textbook has to say this about equilibrium, it is the point of balance between price
and quantity. At equilibrium, the market is good, and it is stable (OSullivan and
Sheffrin 125). To economists, equilibrium means stability. One of the easiest ways
to find equilibrium is by looking at product prices in the market. Thankfully in the
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free market, competition pushes prices toward equilibrium. When the economy is in
a state of disequilibrium, then this is an indication of an unbalance in prices.
Disequilibrium is common in monopolies. Because monopolies face no competition
then there is no natural regulation of prices. Showing how competition and prices
coexist, Compared to a perfectly competitive market, a single-price monopoly
restricts its output and charges a higher price (Monopoly). In order to make more
profit, monopolies choose to restrict their output. No competition allows for
monopolies to release a smaller supply, and in doing so, they are able to raise prices
to an abnormally high rate. Competitors create stability as shown here, In a
competitive market, it is the act of competition that drives prices towards the
equilibrium price and quantity at which the marginal firm makes zero economic
profits - they are earning just enough money to cover their costs of production and
to pay their owners a return that is sufficient to cover their risks (Posner). The
economy can regulate itself naturally. This has been shown in a competitive market.
Even in competitive markets, firms still produce money. When monopolies choose
to raise prices above the equilibrium price only they benefit. The consumers do not
benefit and neither does the economy. Monopolies have used many tactics before to
wipe out competition by using prices. One heinous tactic is described here by,
Temporarily lowering prices, or even offering a product for free, to drive
competition out of business. Once the competitors have given up, the monopolist
raises prices to their profit-maximizing level (which is usually substantially higher
than the level that competitors charged) (Linfo). In an effort to drive out
competition, monopolies have turned to dropping prices so low that competitors
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could not meet their level and still be successful. This strategy is a smart but
deceptive one. In the end once all competition is eliminated the monopoly has full
control and can reinstate high prices for their products. Monopolists also like to take
part in a practice called price discrimination. This example explains price
discrimination by saying, monopolists not only have the ability to charge a higher
price than would competitive firms supplying the same product, but they also have
the ability to charge significantly different prices to different customers for the same
product (OSullivan and Sheffrin 163). Monopolists understand that with the high
prices they set that not everyone can afford to purchase their goods. Instead they
price discriminate and set rates according to different consumer groups. This is
done so that monopolists can charge the maximum value for each demographic
group. Examples of price discrimination include student discounts, elderly
discounts, and even children half off. With this strategic approach, no one can
escape the high set prices. From this evidence it is proven Monopolies harm the
economy by their abuse of prices. They dictate their market and leave room for no
exceptions. It is because of these price raises that monopolies are harmful to the
American economy.
Monopolies have proven their harm in the economy through a plethora of
examples over time. By robbing the citizens of basic rights guaranteed to them in
the free market, monopolies commit crimes against the economy. Monopolies
impair the rights of citizens to purchase the goods they desire. They limit the
consumers ability to look for lower prices and in return, give consumers back
products that are not made according to the highest industry standards. Monopolies
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destroy competition and limit the economys right to open opportunity. By limiting
open opportunity a less than stable economy is created causing chaos among
consumers and producers. Competition, created through a healthy pricing and
purchasing, pushes the market toward equilibrium. When the market is pushed
away from equilibrium this leads to another economic problem caused by
monopolies, an increase in pricing. When monopolies destroy competition, they
have no need to lower prices to attract customers. The monopolies are the only
suppliers in the market so they have the full capability of dictating how the entire
market is run, regardless of whether this is a benefit for the consumers or not. The
dangerous part about monopolies is every problem is connected to one another. All
the negative results of monopolies are intertwined with one another in an intricate
web. As monopolies destroy competition, notice as a result this allowed for prices to
go up. Over priced goods is not something a consumer would want to buy, but
because monopolies destroy the competition, they leave no other available options
for consumers, eliminating their freedom of free choice. Monopolies are nothing but
a burden to the free market system and the economy. In the end monopolies in the
economy and on a board game both bring bad news. Once the game of monopoly
starts up, no one is the real winner.





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Works Cited
Chin, Anthony, and Hock Guan. Ng. Economic Management and Transition towards a
Market Economy: An Asian Perspective. Singapore: World Scientific, 1996.
Print.
Linus. "Monopolies." (LINFO) Home Page. THE LINUX INFORMATION PROJECT,
20 Jan. 2005. Web. 29 June 2014.
Lynn, Barry C. "Killing the Competition." Killing the Competition (2012). Harpers.org.
Feb. 2012. Web. 29 June 2014.
O'Sullivan, Arthur, and Steven M. Sheffrin. Prentice Hall Economics: Principles in
Action. Boston, MA: Pearson/Prentice Hall, 2007. Print.
Posner, Barney. "Market Power and Monopoly." Welcome! Pennsylvania State
University. Web. 29 June 2014.
Vandewetering, Ike. "Monopoly." 2.econ.iastate.edu. Iowa State University. Web. 28
June 2014.
Wu, Tim. "In the Grip of the New Monopolists." The Wall Street Journal. Dow Jones &
Company, 13 Nov. 2010. Web. 29 June 2014.