The Dangers of a Monopoly

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Monopolies are not limited on market dominance, but more so elimination of competition.
Monopolies are not limited on market dominance, but more so elimination of competition. (Image: Medioimages/Photodisc/Photodisc/Getty Images)

A monopoly, by definition, is the control of a commodity or service in a particular market, making possible the manipulation of pricing for that commodity or service. In order to be considered a true monopoly, the dominant player or players not only have to be free from competition, but must make the possibility of competition impossible.

Having a monopoly on a product, good or service is not illegal in the United States, despite what some may believe. What is illegal is making it impossible for competitors to enter the marketplace. The underlying foundation of a capitalistic society is that competition should drive the marketplace.

Price Gouging

When one company is the sole provider of a good or service, it has control over the pricing of that product. To some extent, the public can still control the price by not purchasing that item if it is not considered a good value. But without competition, there is no way to determine what a good value is. Worse yet, monopolizing an essential commodity, if it were possible, like water, gasoline or milk, would make it almost impossible for individuals to do without, and in that case the company could “name its price.”

Gas price gouging due to natural disasters of foreign events remains a concern.
Gas price gouging due to natural disasters of foreign events remains a concern. (Image: John Foxx/Stockbyte/Getty Images)

Squelching Innovation

By preventing competition from entering the marketplace, innovation is impossible to introduce. When this occurs, there is no possibility of quality of life improvements or reduction in price. Inventors and entrepreneurs, the individuals who drive capitalism, would have no place in a monopolized business setting to test their theories, ideas or innovations out on a hungry public.

Innovation is crucial to product advancment.
Innovation is crucial to product advancment. (Image: Photos.com/Photos.com/Getty Images)

Inferior Products

If only one company can manufacture a produce or manage a service, there is no incentive for that company to improve its performance or efficiency. There is no added value for the change. The company can put whatever price they want on the product today, so spending money on research, development, new equipment or retooling only cuts into the profit stream. The end result is a product that remains unchanged, unimproved, poorly constructed and marginally effective.

A monopoly can lessen standards with inferior products and still make money.
A monopoly can lessen standards with inferior products and still make money. (Image: Photos.com/Photos.com/Getty Images)

Poor Service

Single source manufacturing also promotes poor customer service. There is no need to be helpful or outgoing for a customer, because he has nowhere else to go. If service is provided for the product, it too would likely be overpriced and inconvenient for the user. The manufacturer would have every ability to force the consumer into its customer model instead of visa-versa. This may mean no home service, no warranty on the product’s longevity or overpriced replacement parts.

Customer service is important for market competition.
Customer service is important for market competition. (Image: Jack Hollingsworth/Stockbyte/Getty Images)

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