Is monopoly good for society?


Bohai Li

Monopoly is a very common economic phenomenon, when a company in an industry is dominant. While we may not be more or less involved in monopolies, some of the goods we buy in our daily lives are made by large companies in related industries. When one person mentions a product, others can immediately associate with a corresponding company, this is a brand monopoly, and this is not only produced by a single element, but also by the efforts of many generations.

The characteristics of monopoly

Like other phenomena, monopoly also has its own corresponding characteristics. The combination of a single supplier, a lack of alternatives in the market (when the supply of a brand of goods decreases, it is often difficult to find a similar product to replace it), high barriers to entry in the market, and the price of goods usually determined by the monopolist, make the monopoly status is difficult to shake.


The reason of monopoly

So why do monopolies exist? In many cases, controlled resources such as oil, gas, and water are controlled by the government in order to prevent certain groups of people from controlling the prices of these necessities and causing market imbalances, this is often referred to as natural monopoly.


And a government-mandated monopoly, when a new drug brand comes to market, the government grants patents and operating privileges that allow the patent development company to monopolize the market profits for a period of time.

Another typical example is that about 20 years ago, there were many communication group companies in some Asian countries, but in recent years, most of these companies have been merged. For example, in China, China Mobile and China Telecom are usually the two major companies leading this field.

The problems of monopoly

In some areas of technological innovation, monopoly sounds like a very good phenomenon, which can combine limited resources and put them into professional and precise fields, which can promote scientific and technological development and the research and development of new products faster. But is that all? Too absolute industry monopoly will lead to scientific and technological research and development due to the lack of competitive pressure and greatly reduce the level of progress, there is also a situation that the price is too high because of industrial monopoly.

Beside of this, monopoly’s biggest problem is to lead over high price. Most monopolists tend to raise prices in order to maximize profits. However, this kind of price is usually raised to a point that is much higher than the market equilibrium price, that is, the price point that reaches the balance between supply and demand. This problem usually leads to a large shortage of goods or excessive supply of goods, resulting in loss, reduced benefits and low efficiency.

For the emergence of monopoly phenomenon, the government will also introduce relevant policy responses. The government usually promulgates the "anti-monopoly law" to restrict monopolistic behavior and ensure healthy competition in the market. The purpose of this policy is to prevent some enterprises from eliminating competition by unfair means through government intervention, ensure the normal operation of the market, and protect the rights and interests of consumers. Speaking of this, monopoly is not only an economic concept, but also a key issue in market regulation that cannot be ignored.

In conclusion, monopoly is a common phenomenon in modern economy and affects market structure and economic efficiency in many ways. While monopolies can provide short-term incentives to innovate, in the long run they can lead to higher prices, lower efficiency, and loss of consumer welfare. Therefore, the government must keep vigilant against monopolistic behavior in its economic policies and prevent monopolists from over-expanding through anti-monopoly law and other means to maintain fair competition in the market.

About the author
Bohai Li is a second year Accounting and Finance student. 
You can contact Bohai b.li@stu22.qmul.ac.uk

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