Monopoly-price, therefore, cannot mean one which is de termined without the operation of competitive motives, but one which is determined through their more or less partial and one-sided operations When monopoly exists the market is not a full or complete one, but competition may still be very active in many respects.
§ 8. Absolute and relative monopoly. An absolute mo nopoly might be said to exist whenever the entire group of traders having control of some kind of goods, on one side of the market, is united to act as one person. This situation rarely occurs and even when occurring is modified by the power of substitution of goods somewhat similar. Monopoly, therefore, is nearly always relative rather than absolute. Monopoly and competition both may better be thought of as qualities more or less marking the conduct of traders on either side of a market than as absolute concrete situations. The element of competition is always present in large measure either on both sides of the market or on one side. Monopoly, however, is more likely to occur within the smaller group of traders, while competition is more likely to continue within the larger group, and in varying degrees from the least to the greatest.
Wherever any agreement exists among bidders it makes their action lose, in so far, its competitive, and take on a monopolistic, character, tho this may be very slight and not socially harmful. Likewise the element of monopoly is present among small traders whenever there is but one trader on one side (the buying or the selling side) and he makes a more or less separate bargain, at different prices, with each of the traders on the other side of the trade, forcing each toward the upper limit of valuation.
§ 9. Motives and germs of monopoly. As competition is always forcing buyers to bid up, and sellers to bid down against the general interest of their groups, there is an ever 2 This caution is necessary as the student will find frequently the assumption that a monopoly-price is not influenced by competition.
besetting motive for monopoly. If two or more of the traders on the same side of the market can get together and limit their mutual competition, they often may gain, tho at the correspond ing loss of the other parties. Evidences of this practice ap pear throughout all the history of commerce.
The germs of monopoly are in any device whatever, that is used to keep any trader from competitively bidding in ac cordance with his individual interest as he sees it. A group of the most eager bidders at an auction sale may combine and pay the least eager buyers each something to keep them from bidding, and then buy up the whole supply for a trifle. Or
all would-be buyers may secretly agree to let one or two do all the bidding and to divide the results. If, on the other hand, the auctioneer has confederates who pretend to buy the goods if the price is not as high as the auctioneer expects, a fictitious market price results, and buyers lose the chance that brings them to the auction, that of "picking up a bargain." An auctioneer often conceals the fact that there is more than one of an article, and having sold it off, brings out a second or a third one of the same kind, thus keeping the buyers in ig norance of the supply and getting somewhere near the esti mate of the most eager buyer in each § 10. Types of monopoly-price: receipts vs. profits. These petty devices develop, in the case of larger markets and of many important articles of sale, into the systematic prac tice of manipulating prices artificially. The explanation of the motives and of the limits of monopolistic price-fixing would best be reserved in large part until a later stage of our study, where it can be considered in connection with enterprise. It is in the sale of the products of a business that the most im portant problems of monopoly are found. There the monopo list is seeking the highest net gain over a considerable period in the sale of a continuous output of goods. The cost per unit is the minimum seller's valuation and the monopoly-price sought is that which in the long run yields the largest gain a See ch. 6, seem 6-9.
(the product of units of sales times margin of gain per unit). Let us here consider merely the case where the monopoly (seller or group of sellers) is seeking the maximum total price (not net gain) for a stock of goods which have no minimum seller's valuatioh. Such is the classic example of monopoly in colonial trade related by Adam Smith : "In the spice is lands the Dutch are said to burn all the spiceries which a fer tile season produces beyond what they expect to dispose of in Europe with such a profit as they think sufficient." This type of cases is of not infrequent occurrence. Such a case is presented whenever the unsold portion of a supply would go to waste, such as perishable goods after they have come to market (fruits, vegetables, etc.), such as vacant seats in an opera house, at athletic games, etc., where the expense of the whole performance has been incurred and will not be in creased by more spectators. We may call this price which concerns the gross receipts from sales, crude monopoly-price. It is that which yields the monopolist (with complete control of supply) the maximum gross receipts.