Consequences Of Facing A Monopoly Employer Dedicated To Profit Maximization

Surname 1

Name

Tutor

Institution

Date

Consequences Of Facing A Monopoly Employer Dedicated To Profit Maximization.

The research paper will look into monopoly as one of the market structures, how

monopoly is created, and its consequences in real economic life and how it influences decision

making in the economy. It will look mainly into the effects of facing a monopoly employer who

seeks to maximize profit at the expense of employees welfare and how it affects managerial

decision making in a typical real world scenario.

This paper contains case studies of typical firms across the world which have faced this

challenge before and the decisions which were taken regarding the problem at hand. They are

well outlined to demonstrate my understanding of the economic concepts already taught in class

and their applicability in real world scenarios. This paper also seeks to enhance my knowledge

and understanding of economics.

Monopoly is defined in microeconomics as a situation where on the producer or a group

of producers controls the supply of goods and services, and where the entry into the market or of

a new producer is prevented or highly restricted.Monopolist firms in their an attempt to

maximize profit tend to keep the prices high and show no or little responsiveness to the needs of

their customers or buyers.

Even though the government always try to control monopolies sometimes, they facilitate

the creation for various reasons, for example for national security concern, to realize economies

of scale for competing with firms globally, or to prevent wastage of resources among different

Surname 2

producers.Monopoly affects employees in the various sectors of the labor market for example

where the one employer and many workers want to gain employment.

In the job market, a company who enjoys monopoly power holds down the wages by

limiting the number of employees it hires. This is exploitative in the sense that at the resulting

inefficiency level of work, the value of the last worker’s contribution to output is greater than the

wages he or she receives. A monopolist employer faces a finite labor supply elasticity.

Inefficiency and exploitation in the labor market can be decreased by a well-placed

minimum wage enforced by the labor union or maybe by the government. This measures can

increase pay, increase employment and improve economic efficiency.

In the USA labor market researchers have investigated whether the market of American

professional baseball was a monopoly. Until 1976, the reserve clause in the player contracts

bounds each player to a single team, an extreme form of collusion. This resulted in teams not

competing for players. Players were also paid less than half of the value their contribution to

output. After the reserve clause had been ended in 1976, players with at least six years of

sportsmanship were free to negotiate with other teams. Salaries eventually upsurged. During the

year 1989, the rate of exploitation was estimated to have plummet close to zero.

In the late nineteenth century, the firms with significant monopoly were the US oil

companies and railroads. Currently, we have seen a new set of mergers, companies like Google

and Amazon are a few to mention.

Amazon has over 30 % online retail of books and DVDs. By 2012, it had 27% of the

market share for selling books units, both e-books, and traditional ones.

Surname 3

A firm like this with monopoly selling power often create monopsony buying power. If you are

an author, there provided only limited number of forms which will take your e-book and sell it

for you.

Considering the little available or choices of firms to retail your product, these put

authors as well as publishers in a weak position. This translates to Amazon dedicating the

amount they pay to authors especially small independent authors.Kate Pool, deputy chief

executive of the Society Authors, expressed his concerns that Amazon could be abusing their

monopoly power to squeeze the profits of artists.

It is evident enough that barrier to entry is very high in the e-books sales market. This is

seen in the way new firms find it tough to replicate the market penetration, brand loyalty and

market dominance currently enjoyed by Amazon.

Recently there has been an ongoing dispute between Amazon and Hachette, a major book

publisher. The publisher was unhappy with amazon’s pricing of e-books and resorted to

changing its pricing model and retaining themselves the ability to set a minimum price.

Amazon refused to strike an acceptance agreement on pricing with Hachette and declined

to keep an additional inventory of some Hachette print books in stock and to delay their shipping

times. This has prompted suits against Amazon for abusing the market power and as a result

subjected them to anti-trust action.

This has led Amazon to be accused of monopoly behavior by an industry partner, in this

case, groups representing authors, agents, and booksellers by setting pricing terms and squeezing

them. This has prompted debate whether Amazon is a monopolist.

Surname 4

Some people have argued that it’s the authors and publisher lack of creativity in

marketing and distribution which has birthed the need for online retailers that is now dominating

the market.

This is a market constraint depicted on the side of publishers and authors, and it’s apparent that

Amazon has seized this opportunity.

Perhaps, the government should bring a suit to protect the authors and publishers from

exploitation by Amazon and investigate Amazon’s monopoly practices.The European

Commission and the Department of Justice had launched a probe following the provocation of

authors to allow them to set prices themselves rather than letting Amazon.

It can be good for consumers if suppliers price their products as they wish rather than

giving a distributor free rein to do so.Minimum prices deals helped to erode Amazon’s initial

dominance in e-readers by encouraging competition from B&N and others.

There is an option to allow some publishers to set e-book prices above the level Amazon

caps it, that is fine if and only if they do not collude to fix prices.A conglomerate dubbed Author

United had sought the help of the federal government to regulate Amazon for what they call a

monopoly on the book selling the business.

Several complaints put forward by Author united against Amazon painted a true picture

of a monopolist, and they included the following; the company controls 75 percent of online

physical sales,65 percent of e-books sales, and 40 percent of new book sales, along with an

enormous 85 percent interest in self-published e-books, the company mounts a lot of pressure on

publishers by threatening to block sales, the company has engaged in content control based on

the relationships with the publisher, status of the author, or even political leanings,the company

uses its marketing power to direct readers to its own books, which disadvantage others, and

Surname 5

finally the company sells books for low prices in order to pump up retail sales across the site in

non-book departments in order to drive other retailers out of the business.

In my view and conclusively, monopolist firms which tend to exploits consumers should be

regulated, and the government should step up to ensure that there are strict regulations in place to

protects its citizenry from unscrupulous firms and business.

The government can implement laws and regulations and ensure that firms in the

economy are adherent to these set rules. One way the government can achieve this is by carrying

out an investigation of abuse of monopoly power, for example, abating colluding firms who set

predatory prices and breaking up monopolies with too many powers.

Considering the competitive advantage that monopolist has I am also of the view that

infant industries should be protected from more established firms to enable them to pick up in a

competitive market and prevent them from choking off. This, in turn, will help abate consumer

exploitation.

Surname 6

Works Cited

Matthews, David. "Book review: The Endless Crisis: How Monopoly-Finance Capital Produces

Upheaval from the USA to China, by John Bellamy Foster and Robert W.

McChesneyFosterJohn BellamyMcChesneyRobert W.The Endless Crisis: How

Monopoly-Finance Capital Produces Upheaval from the USA to China, Monthly Review

Press: New York, 2012; 227 pp.: 9781583673133, $25." Capital & Class, vol. 38, no. 3,

2014, pp. 634-636.

Kirkwood, John B. "Collusion to Control a Powerful Customer: Amazon, E-Books, and Antitrust

Policy." SSRN Electronic Journal,

Place new order. It's free, fast and safe

Paper type

Deadline

Page count

550 words

Total price: $ 15.00

Our customers say

Jeff Curtis

USA, Student

"I'm fully satisfied with the essay I've just received. When I read it, I felt like it was exactly what I wanted to say, but couldn’t find the necessary words. Thank you!"

Ian McGregor

UK, Student

"I don’t know what I would do without your assistance! With your help, I met my deadline just in time and the work was very professional. I will be back in several days with another assignment!"

Shannon Williams

Canada, Student

"It was the perfect experience! I enjoyed working with my writer, he delivered my work on time and followed all the guidelines about the referencing and contents."