Monopoly is a market situation characterized by “high barriers to entry” and existence of “a single seller of a well-defined product for which there are no good substitutes” (Gwartney et al. 478). Markets with high entry barriers and few firms offering same products present a perfect environment for monopolies to thrive. Many forces can hinder firms from entering a market. These factors may include legal barriers, economies of scale, patents, and control over an essential resource.
Many economists and consumers view monopoly as unacceptable. However, according to Yao & Lydia “…a monopolist could significantly increase the social welfare” (27). They further claim that the deadweight loss associated with monopoly is not far reaching as documented. The two researchers give characteristics of monopoly that are common to those sited by Gwartney et al.
Monopoly, in real life, is not about the absence of competitors, but the existence of a dominant industry player whose policies affect the market significantly. Whereas in theory, a perfect monopoly requires the existence of only one firm or business commanding a line of business or service, such a situation can hardly exist in real world situations. In real market situation, monopolistic tendencies are registered where a few or one firm command a high percentage of a market segment like Microsoft does in the software industry. Currently, Microsoft’s Windows Operating system is the most widely used operating system in the world (Jesdanun). Even though other open source operating systems such as Linux exist, most of which being absolutely free, the company’s products have remained the most preferred over the last few decades. The company has thus, been able to charge its preferred prices in complete disregard for competitor’s activities. This is a case of monopoly. Worst still, essential software in the market have been developed to operate on windows operating system, thereby making it so hard for consumers to migrate to other competing operating systems. As such, Microsoft’s market dominance could last for quite a long time.
Markets are dynamic and businesses must make the most out of their resources. However, in the process of making profits, businesses must consider the plight and burden of consumers. Overpricing, due to exclusive control of resources or patent, is both unfair and unjust. As proclaimed in New International Version BIBLE, Proverbs 22:29, “Seest thou a man diligent in his business? He shall stand before kings; he shall not stand before mean men,” diligence in business is rewarding.