Question

The United States has a variety of regulations to address the economic harm resulting from monopoly power in an industry. This includes the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These acts were aimed at restricting the formation of cartels and monopolies to protect consumers and ensure competition. The article The Oligopoly Problem argued that oligopolies fall through the cracks of these regulations and leave consumers unprotected from harmful business practices where industries are highly concentrated. Read the article and respond to the following in your initial post:

• What are examples of firms in an oligopolistic market that abuse their power? Explain how they abuse their power and describe the impact on consumers.
• Do you agree with the author's feelings about increased government oversight of such industries? Why or why not?

In your response posts to peers, comment on your own experiences with such industries and on their impact on you. Additionally, discuss whether you agree or disagree with your peer's stance on regulation, explaining why.

Answer 1

Oligopoly is a market structure where a limited number of producers of sellers control the whole market dominance. This market structure is also characterized by almost no competition and the terms of the market are defined by the oligopolists ruling the market. Some of the examples of the Oligopolistic market structure are the cell phone network provider market. In this market, a very few big sized network operators control the complete market, thereby setting the price in the market for the services they offer, as per their own wish. They control the total activity in the market and levy restrictions on services they desire, in order to earn extra normal profit. Another example of an oligopolistic market is the Pizza food chains. There are very little of such chains which are in themselves of large size each. They control the market prices and charge exorbitant prices for items which otherwise should not cost much. They also control the services they offer and dominate the market. As a result of such oligopolists, the consumers are the ones who suffer. In this type of market structure, the consumers have no say, and have to accept any price or services as and when offered by the providers. The consumers have so little choice or option to move around , that they are forced to stick to the oligopolists in spite of their unwillingness to pay exorbitant rates and bear with the services of the service providers.

  The Government oversight of such Oligopolistic industries is well accepted and a fact that cannot be negated. The Government has never been successful or in a broader sense, never been willing to control such oligopolistic markets. There have been many instances where many consumers have reached out to the Government for adequate steps to be taken to control the dominance of such market operators, however, in many years now, there has not been any measurable adequate step taken by the Government to regulate the terms of such oligopolistic markets which bloom around in the market. One of the reasons, well talked about, for such an oversight by the Government, as said, could be the huge tax revenue that the Government generates from such oligopolists. These dominators pay huge tax to the Government, thereby crippling the Governments actions against them, if any.

  One of the experiences worth sharing could be with a Mobile network service provider that I had about a couple of years ago. The network service in my area wasn’t expectedly good, mas the mobile network tower was quiet far away from my area. After many complaints, there was still no action to improve the service. Moreover, the prices of the services were ever increasing with new taxes being imposed unnecessarily. When I wanted to move away to a new service provider and enquired about the price details, it was astonishing to find out that the new service provider also charged almost the same prices even when it had very less subscribers from my area. This fact shows, how these service operators dominate the market, with prices which are exorbitant and consumers have to follow their decisions , whether we agree to them or not.