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Monopoly
they are the only one who can provide the service. Next reason why the
government should treat telephone, cable or broadcasting companies as
Natural Monopolies is because if they dont other company wouldnt be able
to get in because those companies would setup barriers. A Barrier that
natural monopolies could setup so no other company could get in is high
setup cost. High setup cost is a problem because some small company might
not have the funds to afford high startup cost off top. Another barrier can
come in the form of advertising. Advertising will be a problem because some
companys dont have money to advertise. also because if a larger company
has a lot of advertising going on than this might frighten small companys
from even trying to compete.
Other types of barrier that a as Natural monopolies could setup to stop other
companies from getting in is by lowering their prices for that type of service.
This could be a problem for a new company just getting in because they
havent made any money yet so its a lot harder for a company to lower price
when they havent made any thing. Also this would be a problem for smaller
companies because they wouldnt have the funds to keep up with a larger
company.
The last types of barrier that a Natural monopolies could setup to stop other
companies from getting in is by offering Loyalty discounts this is a way big
companys try to keep their customers from going to a new company, they
offer the customers discounts that would be harder for a new or smaller
References
Train, Kenneth E. (1991). Optimal regulation: the economic theory of natural monopoly.
Cambridge, MA, USA: MIT Press.
Stuart Minor Benjamin , Howard A. Shelanski , James B. Speta , Philip J. Weiser
(2006). TELECOMMUNICATIONS LAW AND POLICY. Carolina Academic Press