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Coercive monopoly | ||
In economics and business ethics, a coercive monopoly is any monopoly maintained by coercion. Some use the alternative definition that a coercive monopoly is a form of monopoly where a firm is able to make pricing and production decisions independent of competitive forces because all potential competition is barred from entering the market. Almost all those who employ the term to label such a state of affairs maintain that it can only be achieved by government intervention, though some note that a merchant can itself engage in coercion to secure a monopoly position. A coercive monopoly is not merely a sole supplier of a particular kind of good or service (a monopoly), but it is a monopoly where there is no opportunity to compete through means such as price competition, technological or product innovation, or marketing; entry into the field is closed. As a coercive monopoly is securely shielded from possibility of competition, it is able to make pricing and production decisions with the assurance that no competition will arise. It is a case of a non-contestable market. A coercive monopoly has very few incentives to keep prices low and may deliberately price gouge consumers by curtailing production. Also, according to economist Murray Rothbard, "a coercive monopolist will tend to perform his service badly and inefficiently." Contrasted with other monopoliesExclusive control of electricity supply would be a coercive monopoly because users have no choice but to pay the price that the monopolist requests. Consumers would no alternative to purchase electricity from a cheaper competitor. Exclusive control of Coca-Cola would not be a coercive monopoly because consumers have a choice to drink another brand of soda, and the Coca-Cola company is subject to competitive forces. There is an upper limit to which the company can raise its prices before profits begin to erode because of the presence of viable substitute goods. Contrastingly, for a non-coercive monopoly to be maintained the monopolist must make pricing and production decisions knowing that if prices are too high or quality is too low that competition may arise from another firm that can better serve the market. If it is successful, it is called an efficiency monopoly, because it has been able to keep production and supply costs lower than any other possible competitor so that it can charge a lower price than others and still be profitable. Since potential competitors are not able to be so efficient at producing, they are not able to charge a lower, or comparable, price and still be profitable. Hence, competing is possible but doing so is not profitable. Whereas, for a coercive monopoly competition is neither profitable nor possible. Establishing a coercive monopolyAccording to business ethicist, John Hasnas, "most [contemporary business ethicists] take for granted that a free market produces coercive monopolies." However, many ethicists and most economists assert that such independence from competitive forces "can be accomplished only by an act of government intervention, in the form of special regulations, subsidies, or franchises." Some point out that a monopolist themselves may "employ violence" to create or maintain a coercive monopoly. Some recommend that government create coercive monopolies. For example, claims of natural monopoly are often used as justification for government intervening to establish a statutory monopoly (government monopoly or government-granted monopoly) where competition is outlawed, under the claim that multiple firms providing a good or service entails more collective costs to an economy than that which would be the case if a single firm provided a good or service. This has often been done with electricity, water, telecommunications, and mail delivery. Some economists believe that such coercive monoplies are beneficial because of greater economies of scale and because they are more likely to act in the national interest, while Judge Richard Posner famously argued in Natural Monopoly and Its Regulation that the deadweight losses associated with regulating such monopolies were greater than any possible benefit. Copyright 2008 - France BtoB from Wikipédia
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