In this week’s SO Musings, we recall John A. Sparks’ piece titled “Monopolist” Can He Charge “Anything He Wants?” published in the August 1972 edition of The Indian Libertarian magazine. The author brings forth the misconceptions about a monopoly through a dialogue within a classroom and discusses the popular misconceptions about control by monopolists in the market. Towards the end of the piece, the author asks again “Can the seller who is without actual competitors really charge anything he wants?”
Published below is an excerpt from the original piece.
To their first course in economic principles, college students bring a wide assortment of misunderstandings. The “nature of competition” is a subject where there is almost always confusion. During a recent classroom discussion one student, who is representative, said: “This idea of rivalry between producers is fine, but what if there is only one producer of a product, for example, one dairyman in a town. Then, it seems to me that he would have a monopoly and could successfully charge any price he wanted to charge.” The class nodded a general assent.
The fallacy that the exclusive producer of a good or service holds the enviable power to charge “anything he wants” has been exposed and refuted. Yet, most members of the class assumed that in the absence of other “flesh and blood” competitors there would be no curb upon the pricing practices of the single seller. Preoccupied with “competition by competitors,” the class neglected other important kinds of competition. They are not alone.
“When competition is named as a regulator in enterprise outputs and prices, it is usually the competition among the firms already established in this or that industry which is emphasized…Most studies of individual industries refer, when discussing competition, almost entirely to rivalry among established firms.”
What are the alternatives to “competition by competitors”? What forces keep the lone producer from charging “anything he wants”?
To find out the answers, read the full text which can be accessed here on page no. 16
IndianLiberals.in is an online library of all Indian liberal writings, lectures and other materials in English and other Indian regional languages. The material that has been collected so far contains liberal commentary dating from the early 19th century till the present. The portal helps preserve an often unknown but very rich Indian liberal tradition and explain the relevance of the writings in today’s context.
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