ECON 2200 Lecture Notes - Lecture 32: Monopoly, Oligopoly, Judicial Interpretation
14 May 2018
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ECON 2200
Lecture 32
• Net assets as 3 individual firms = $700 million
• Net assets as 1 firm = $1.4 billion (economies of scale)
• Controlled 1/2 steel making capacity of U.S.
• Controlled huge amount of coal, ore, transport
• Involvement of investment bankers
• Firms grew, but so did markets
o Many firms that once had local monopolies actually faced
increased competition.
o Monopoly power depends on size of firm relative to it’s market.
• In some local markets, competition actually increased.
o Recall the impact of RRs and falling transport costs. This
created national markets
• Few firms managed to maintain monopoly power.
o Short-run monopoly power if often eroded in the long-run
through the entry of new firms
• Most markets were closer to oligopolies.
o A few firms rather than a single firm control the market.
• Diversification meant availability of substitutes.
o Existence of substitutes (alternative product) reduces power of
a firm to monopolize a market.
1. ie. Swiss Meats and American Tobacco Co.
For instance, if prices of cigarettes go too high,
people could still roll their own.
find more resources at oneclass.com
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Document Summary
Lecture 32: net assets as 3 individual firms = million, net assets as 1 firm = . 4 billion (economies of scale, controlled 1/2 steel making capacity of u. s, controlled huge amount of coal, ore, transport. Involvement of investment bankers: firms grew, but so did markets, many firms that once had local monopolies actually faced increased competition, monopoly power depends on size of firm relative to it"s market. In some local markets, competition actually increased: recall the impact of rrs and falling transport costs. So, how the law should be interpreted was left to federal judges: judicial interpretation (supreme court cases) & the 2nd merger wave, u. s. v. e. c. Knight co (1895: court discouraged enforcement of the act by decision. But mergers were still legal: u. s. v. u. s. steel corp, court decision made mergers even safer by finding that the corporation possessed neither power nor intent to exert monopoly control.
