Just learned the topic on Monopoly 2 days ago in lecture, and the first few things that flash into my mind upon this word were ‘What governs and allows monopoly in reality? Is it even good to practice such market structuring concepts?’
Reality stands infront of our imaginative perfect world of competition. Take Malaysia for example, TNB Sdn Bhd and PUAS Bhd, our sole provider for electricity and water are good examples of monopoly company. While having a monopolist in an industry will enable it to utilize the full potential of the resources available and thus, reducing average total cost, which in terms, means less price needed to be pay by the consumers, this could mean the other way round though if a particular monopolist decides to rise price with an aim for gaining more profit.
We all have already witness the on-going rise of price for electricity and water in Malaysia, which is also clear evidence too. They on their trump, complain about rising cost for producing energy and utilities, giving excuses for a rise in price, in the end, the consumers will suffer.
Why do we as consumers suffer? This is because competition in this particular industry had long fade off. Competition leads to price wars, R&D increases at a greater pace with a hope of stealing more consumer’s heart. Telecommunications Operators in Malaysia are one such example. DiGi, Maxis, Celcom(now TM Company) are 3 players in the telecom fields who are so competitive that price slashes every now and then, giving more and more benefits to consumers.
What actually makes monopoly a reality? Take Microsoft for example, they were established for a long extend of period, with products going household to household day by day continously for so many years without any rival product to compete with them. They are already a household name, no one can really live without Microsoft, at least that was how the general household(which hold the largest share of software buyers) thinks. Linux and other similar Operating Systems came in late, unable to capture the heart of the consumers even though it is free compared to the huge cost of Microsoft Licenses. This is why Microsoft has no fear of charging a high license fee even though rival products exists, because no one can live without it. It is their food, their soul, their energy to survive on!
However, they do have drawbacks though. Inefficiency in after sales service is clearly noted in any Monopolist firm. Monopolists tend to extend their funds into their pockets and neglect consumer benefitial programs such as R&D to improve their products and also after sales support service. This results in a major hog down on complains by the consumers but were left with no choice in the end as they only have 1 source to look for their needs. Microsoft has significant major ‘Software loopholes every few months’ while Monopolists in Malaysia are constantly bombard with multiple complains from angered and frustrated consumers.
To practice monopoly would mean getting goods at lowest rates if only the Monopolist will not have intention of maximizing profits. But, which monopolist will be that stupid to stop grabbing such a big piece of cake? Practicing Competitive market Structure would be better otherwise since consumers will always get the highest benefits in the end, while the firms in that industry will be cracking their brains to get the best deals for their consumers.
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I’ll get it from Manda later if I can and post it in the next entry.
