Monopolies definition, pros, cons, impact electricity was invented


4. Monopolies create inflation. Since they can set any prices they want, they will raise costs to consumers. It’s called cost-push inflation. A good example of how this works is the Organization of Petroleum Exporting Countries. The 12 oil-exporting countries in OPEC now control the price of 46 percent of the oil produced in the world.

OPEC is more of a cartel than a monopoly. First, most of the oil is produced by one country, Saudi Arabia. It has a far greater ability to affect the price by itself by raising or lowering output. Second, all members must agree to the price set by OPEC. Even then, some may try to undercut the price to gain a little extra market share. Enforcing the OPEC price is not easy. Still, OPEC countries make more per barrel of oil than they did before OPEC. That power created the OPEC oil embargo in the 1970s. When Monopolies Are Good

Sometimes a monopoly is necessary. It ensures consistent delivery of a product or service that has a very high up-front cost. An example is electric and water utilities. It’s very expensive to build new electric plants or dams, so it makes economic sense to allow monopolies to control prices to pay for these costs.

PayPal co-founder Peter Thiel advocates the benefits of creative monopoly. That’s a company that is "so good at what it does that no other firm can offer a close substitute." They give customers more choices "by adding entirely new categories of abundance to the world."

He goes on to say, "All happy companies are different: Each one earns a monopoly by solving a unique problem. All failed companies are the same: They failed to escape competition." He suggests entrepreneurs focus on "What valuable company is nobody building?" Monopolies in the United States

The most famous trust was Standard Oil Company. John D. Rockefeller owned all the oil refineries, which were in Ohio, in the 1890s. His monopoly allowed him to control the price of oil. He bullied the railroad companies to charge him a lower price for transportation. When Ohio threatened legal action to put him out of business, he moved to New Jersey.

In 1998, the U.S. District Court ruled that Microsoft was an illegal monopoly. It had a controlling position as the operating system for personal computers and used this to intimidate a supplier, chipmaker Intel. It also forced computer makers to withhold superior technology. The government ordered Microsoft to share information about its operating system, allowing competitors to develop innovative products using the Windows platform.

But disruptive technologies have done more to erode Microsoft’s monopoly than government action. People are switching to mobile devices, such as tablets and smartphones, and Microsoft’s operating system for those devices has not been popular in the market.

Google almost has a monopoly on the internet search market. People use Google for 65 percent of all searches. Its closest competitors, Microsoft’s Bing and Yahoo, make up 34 percent combined. But Google is always updating its search algorithms to help it control 80 percent of all search-related advertising. (Sources: "Three Cheers for ‘Creative Monopolies,’" The Wall Street Journal, October 13, 2014. "The Sherman Anti-Trust Act," archive. " Long Microsoft Anti-Trust Case Is Over," Seattle Times, May 11, 2011. "A Google Monopoly Isn’t the Point," Businessweek, September 23, 2011.)