Why some Monopolies are allowed, and even encouraged!
Monopolies
In my last post, we explored Monopolies and the general reasons why they usually are considered bad.
Now, we look at the other side of the coin, exploring why some Monopolies are agreed to be good for the Economy!
Patents
The biggest Monopolies in our world are created by Patents, which allow firms that spend a lot of time and money in research and development to reap profits from their work, without having it stolen by others.
This encourages even more development to take place, increasing innovation, not just minor improvements on already existing products.
Allowed Monopolies
And, even beyond patents, there are many more Monopolies that benefit the wider economy, such as:
Natural Monopolies
A Natural Monopoly is a company that operates in a market in which a single Monopoly has lower overall costs than if there were many companies.
For example, basic services, like water and electricity, are a Natural Monopoly in small countries, namely islands, because there are high initial investments in infrastructure and one company can adequately serve the entire population.
Non-coercive Monopolies
Some Monopolies can arise in industries where there are more producers and sellers, but consumers simply prefer to buy from the Monopoly.
This means that there is competition, albeit small, AND the Monopoly is effective and serves its customers well enough.
Conclusion
As we can see, not all Monopolies are bad, they can be used to improve efficiency and encourage innovation!
Do you know of any recent examples of Monopolies being considered 'good' despite being a Monopoly?
Thanks for reading! Remember to Upvote and Share, so that I can keep making many posts per week!
Take a look at my last post, about why Monopolies can be bad:
Posted Using LeoFinance Beta
