Monopoly

The merit or demerit of the monopoly created by deliberate intent is much more difficult to assess. The creation of some degree of monopoly is in some circumstances an essential factor in the suppression of wasteful competition and the intelligent conduct of an industry as one organic whole. That being so, monopoly may be a proper object of pursuit. The National Light Castings Association in its original rules explicitly stated its object to be that of "raising and keeping up the price to the buyer of goods and articles made and/or supplied by its members . . . by so controlling production that prices will rise naturally and inevitably, as they always must do when supply is brought into equilibrium with or is ever so little below demand." All British associations for the regulation of trade pursue, usually under some euphemism, the same object—that of obtaining a degree of monopolistic power by the limitation of competition; and American associations continue to seek lawful expedients by which production and price shall be steadied against the impacts of blind competition. The great consolidation which comes to terms with its great rival, or buys out a troublesome smaller competitor does so in order to secure a greater measure of monopoly. See TRUSTS.

Monopoly Power, 80%.

Complete monopoly is not essential to the exercise of monopolistic power. It has been asserted that any consolidation or association which covers 8o% of the output of an industry can dictate the prices at which the remaining 20% shall sell its competing products, and so may be described as having an effective monopoly; but that formula cannot be applied indiscriminately, inasmuch as the limiting conditions of control vary greatly from industry to industry. The power over prices

of the incomplete monopoly has been attributed to its power to regulate the greater part of the output of the industry, but this view is not tenable; its power over prices rests in fact upon the reluctance of the non-combine firm to incur the combine's aggres sive hostility, coupled with a readiness to accept for its limited output the high prices ordained by the combine rather than strive after a larger output at a lower price of its own making. It should further be observed that the power of even a i00% monopoly to raise prices against the consumer is limited. The customer has his own recourses, varying much according to the particular commodity, of going without the article or of resorting to some substitute. The intelligent monopolist, on this score alone, will not raise prices to such an extent as to injure his own net revenues; and in practice he will guard against incurring public odium and possible action by the legislature. Also he must not forget that the knowledge of large profits will cause rivals to spring up, whose destruction will cost him some of his gains.

See W. H. Price, The English Patents of Monopoly (1906) ; W. Cunningham, The Growth of English Industry (1907) ; Hermann Levy, Monopoly and Competition (new ed. 1927). (J. H.)