Possibility Of Becoming Monopolized Market - 1007 Words

Possibility of Becoming Monopolized Market Referring to the textbook, the definition of monopoly is a market structure where a single firm serves as an entire market for a good that has no close substitutes. It acts as the crucial threat to innovation and low prices. Due to the fact, the dominance of single-firm with more than half of its market share is almost as harmful to consumer as a monopoly. Back in 1970s, the entrance of WorldCom, Inc. and Sprint into telecommunication market had effect on increasing competitive market. As of now, their merge will only stop the progress and create one of the largest monopoly in the U.S. economy. Overall, the merger of WorldCom, Inc. and Sprint will degrade the variety amount of their motives and†¦show more content†¦According to the text book, when market is highly concentrated, they become single seller market with no substitutes and firms have downward sloping demand curves. In addition, competition is already weak in Internet backbone markets with the huge gap between the prices and costs, and supernormal profits in the industry. Moreover, prices are higher with few competitors, supply is dropping related to demand, and the pace of technical innovation seems to be slow down. Therefore, increased concentration will only strengthen the anti-competitive effects in these long-distance and telecommunications markets. Barriers in Anti-competitive Markets There are several barriers that cause anti-competitive effects when merging two companies. Such as the brand name barrier and sunk cost barriers will make it tough for new companies to get immediate recognition to compete among established companies. It restricts the current firms from expanding and seems to exclude new firms from entering into the market. Also, the effect in networking appears to allow only a few businesses to dominate in telecommunications and Internet backbone markets. Due to this, the argument of WorldCom, Inc. and Sprint’s excess capacity in these markets makes them far from achieving the theory of contestable markets, which is having no barriers to entry and exit. Such ability is highly concentrated between few