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Monopolies, Pools, and Trusts. A Monopoly: What Is It?. A single seller of a product (good or service). Monos : single, alone Polo : to sell Lack of Competition means Higher Prices Inferior Goods and Services Less Innovation

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Presentation Transcript
a monopoly what is it
A Monopoly: What Is It?
  • A single seller of a product (good or service).
    • Monos: single, alone
    • Polo: to sell
  • Lack of Competition means
    • Higher Prices
    • Inferior Goods and Services
    • Less Innovation
  • Competition is the rivalry of two or more parties over something.
competition
Competition

Do you try harder when you’ve got competition? So do businesses!

Think of two runners in a race…

monopolies and competition

Store A

Store B

Monopolies and Competition

$150

$150

$160

$170

$180

$190

$200

monopolies real life examples
Monopolies: Real Life Examples

De Beers

  • A “family” of diamond companies.

Microsoft

  • United States v. Microsoft

Local Water Company

  • The only provider for that service in your area.
pools
Pools
  • A voluntary agreement among companies that
    • sets production quotas
    • fixes prices
    • allocates sales and market territories
  • Monopolistic
  • Emerged before trusts
  • After pools were struck down in courts, trusts emerged
trusts
Trusts
  • Emerged in late 19th century
  • Intended to monopolize business
  • Standard Oil Trust: first well-known trust
  • Before we delve into industrial trusts, let’s take a look at what a legal trust is!
a trust fund
A Trust Fund
  • A trust is like a holding pen for your money or assets.
  • A trust has 4 components:
    • The grantor
    • The beneficiary
    • The assets
    • The trustee
trusts monopolies
Trusts (Monopolies)

Stockholders turn over stock to board of trustees.

Many smaller, competing firms merge into one big company.

The trust can manage the companies without owning them!

trusts monopolies1
Trusts (Monopolies)
  • Trust Tactics:
    • Buy outs
    • Price undercuts
    • Long-term customer contracts
    • Forced customer purchases
    • Intimidation and violence
  • Famous Trusts:
    • Standard Oil, US Steel, American Tobacco Company
trusts monopolies2
Trusts (Monopolies)
  • In this kind of trust, what are the assets and who is the grantor, beneficiary, and trustee?

Stock

Stock

Stockholders

Trust

breaking trusts
Breaking Trusts
  • 1890: Sherman Antitrust Act
  • 1914: Clayton Antitrust Act
  • 1914: FTC Act
  • 1911: Standard Oil Trust “busted” by government action
are monopolies always illegal
Are Monopolies Always Illegal?
  • Not always! Only if they violate antitrust laws.
  • Think about the Local Water Company…
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