Monopoly price

“ It is all important to an understanding of the subject to recognise that a monopoly price and a competitive price are determined by the operation of an entirely different set of economic forces. The loose opinion that it must be to the interest of a Trust or other monopoly to sell at the same price as would be fixed by competition is quite groundless. ”

“ We have, indeed, pointed out for each monopoly described some of the especial abuses to which it gives rise; and it is plain enough that the general tendency is, first, to greatly enrich the possessors of the strongest monopolies at the expense of all other men; second, to give a certain degree of advantage to the possessors of minor monopolies,—as, for instance, monopolies in articles which are luxuries, and can easily be dispensed with; and third, to seriously injure all those engaged in occupations in which the price of the product is still fixed by competition. ”

“ Large monopolies dealing in commodities use an adaptation of this method to kill off small competitors who, within a certain district, sell at less than the monopoly price. Prices are suddenly reduced in that community below cost until, the small competitor being ruined, the monopoly rate is reëstablished perhaps higher than before. Fear of suffering a like fate prevents others from attempting competition even when prices offer a great attraction and give a high monopoly profit. ”

“ The monopoly can no longer reduce its price to apply to only the limited field in which the new competitor works, but must reduce its prices everywhere to meet those made by the rival. In the case of monopolies in trade and all monopolies in manufacturing in which the fixed capital required is but small, this is all that would be needed to encourage the establishment of new competitors and discourage the monopoly from grasping after undue profits from the public. ”

“ When a commodity is at a monopoly price, it is at the very highest price at which the consumers are willing to purchase it. Com341modities are only at a monopoly price, when by no possible device their quantity can be augmented; and when therefore, the competition is wholly on one side—amongst the buyers. ”

“ As competition becomes more intense, its burdens become more heavy to carry. Perhaps two of the largest houses in the trade, who are able to force prices lowest, come to a sort of tacit understanding that their salesmen "will respect each others rights a little and not force prices down beyond all reason." It is plain that here the foundation is laid for the establishment of a monopoly. Yet the agreement certainly seems to be nothing more than these two firms have a right to make. Its result is seen, however, in a slight increase in the price their customers have to pay. ”

“ With all the respect justly due to the learned writer who advanced so bold an opinion, it may be asked, since many instances occur, both in sacred and profane history, in ancient times, and in our own days, of provisions, on particular occasions, selling at one hundred times their natural price, (and, every price above the natural one, is called a monopoly price,) how can it be asserted that they may not become an object of monopoly in a more general way, though not at so exorbitant a price? ”

“ In fact, complete dominance throughout the market, the concept that the District Court apparently had in mind, would never exist even under a pure monopoly. Market power is usually stated to be the ability of a single seller to raise price and restrict output, for reduced output is the almost inevitable result of higher prices. Even a complete monopolist can seldom raise his price without losing some sales; many buyers will cease to buy the product, or buy less, as the price rises. ”

“ The monopolists, by keeping the market constantly understocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate.
The price of monopoly is upon every occasion the highest which can be got. The natural price, or the price of free competition, on the contrary, is the lowest which can be taken, not upon every occasion, indeed, but for any considerable time together. ”

“ Even if the seller has a complete monopoly in the tying product, this is the case. The monopolist can exact the maximum price which people are willing to pay for his product. By definition, if his price went up he would lose customers. If he then refuses to sell the tying product without the tied product, and raises the price of the tied product above market, he will also lose customers. ”

“ Now it does not mean because a monopolist holds temporary control of a commodity that he will raise the price of that commodity. He will surely seek to lower its value by closing down unnecessary factories and installing improved machinery that will lessen the labor contained in his product. Many "monopoly" owned commodities sell at a lower price than they did before they were monopoly produced. ”

“ Rau, Lehrbuch, I, § 158.662.For a good classification of monopolies, see Senior, Outlines, 103 ff. Menger, Grundsätze, I, 195, shows that no monopolist can arbitrarily determine the extent of the market for his monopoly-product when the price is fixed, nor when the extent of the market is known, the height of the price. Moreover, the price may remain longer above than under the cost of production, for the reason that it is easier to abandon a business than to begin one, and that the fear of loss is more frequently an incentive to action than the hope of gain. ”

“ I am far from saying that there can be no such thing as monopoly, and the other hard words that have been so much talked of. In a commodity of a confined nature, within the purchase of two or three large capitals, or of a company of merchants, we all know that it has often existed; and, in a very few instances, the article may have been in part destroyed, to enhance the price, as the Dutch Company destroyed the nutmeg trees in their spice islands: but in an article which is in so many hands as corn is, in this country, monopoly, to any pernicious extent, may safely be pronounced impossible. ”

“ Absolute control over price is never exercised by any monopoly. Nevertheless, we may fairly conclude, in the words of Henry D. Lloyd, that “monopoly is business at the end of its journey,” control over prices is the object of combination. ”

“ Now, even the interest of the monopoly itself would lead it to give the public some benefit from every economy that it makes. This is because the amount of output that will yield a maximum of profit at a certain cost of production is not the same that will yield the maximum of net profit when the cost is lower. Every fall in cost makes it for the interest of the [Pg 365] monopoly to enlarge its output somewhat, but by no means as much as competing producers would enlarge theirs. It will always hold the price well above the level of cost. ”

“ If a single corporation, by its extreme efficiency, or from unusual conditions, should constitute a monopoly so that there was practically no competition, then it would be necessary, he thought, for the Government to fix a price reasonable to all interests involved. ”

“ Of course the great proportion of the persons included in the above number have no direct interest in the profits of the industries in whose operation they aid. It is, indeed, argued that the manufacturer, miner, or merchant who is making enormous profits, pays, therefore, larger and more generous wages; but it is urged on the other side that while this is true in isolated cases, the general rule holds good that the price of labor is governed by the law of supply and demand; and that, as already pointed out, monopoly among producers means a monopoly among purchasers of labor. ”

“ The price of the article must be such as to afford a profit on more than its natural value, instead of a profit on only its natural value. Neither ought it to be forgotten that whatever renders a larger capital necessary in any trade or business limits the competition in that business, and, by giving something like a monopoly to a few dealers, may enable them either to keep up the price beyond what would afford the ordinary rate of profit, or to obtain the ordinary rate of profit with a less degree of exertion for improving and cheapening their commodity. ”

“ Yet any plan which would force a monopolistic employer to give to his men an increased share of the "grab" which he makes from the pockets of consumers tends to increase the amount of the grab if the employer is entirely secure in his position. A monopoly that is thus safe from interference tries to put the price of each of its products at the point where the largest net revenue is afforded. If distance along the line AG measures the supply of a commodity and vertical distance from it measures price, DF will be the price curve of a commodity, as it is offered in increasing amounts. ”

“ Validation by Congress of agreements to exclude competition is unusual. [23] Monopoly is a protean threat to fair prices. It is a tantalizing objective to any business compelled to meet the efforts of competitors to supply the market. Perhaps no single fact manifests the power and will to monopolize more than price control of the article monopolized. There can be no clearer evidence of restraint of trade. ”

“ If the price continues to rise, competition in some form will appear. Take, for example, the business of transporting goods from New York to San Francisco; if all the railway lines combine to form a monopoly, the competition of ocean steamers via Panama would eventually stop the rise in rates, if no other outside competition stopped it before. The owners of a rich mine have a real monopoly, though they cannot raise the price above a certain point without being undersold by the owners of poorer mines or those more remote from market. ”

“ It is true that in this case the monopoly itself has more at stake; and this may induce the starting up of new competitors simply to be bought out by the trust,—a sort of blackmailing operation which is certainly repugnant in its character. It might be possible to provide that rates charged by the monopoly must be so stable that a competitor would have a chance to establish itself before the monopoly could bring its own rates down. It might be possible to force the monopoly to keep all its factories in operation, and thus oblige it to keep down its price in order to dispose of its products ”

“ Such a monopoly as this is now enjoyed by the holders of capital in consequence of the currency monopoly, and this is the reason, and the only reason, why they are able to tax borrowers nearly up to the limit of the advantage which the latter derive from having the capital. In other words, increase which is purely the work of time bears a price only because of monopoly. Abolish the monopoly, then, and what becomes of Mr. George's "real interest" except as a benefit enjoyed by all consumers in proportion to their consumption? ”

“ A Government which absolutely prohibits the importation of certain foreign goods, establishes a monopoly in favour of those who produce such commodities at home, against those who consume them; in other words, those at home who produce them having the exclusive privilege of selling them, may elevate their price above the natural price; and the consumers at home, not being able to obtain them elsewhere, are obliged to purchase them at a higher price. ”

“ By this shutting off from domestic goods the natural [129] competition of corresponding foreign goods by means of such tariff-taxes, a monopoly is created at the instance and for the sole benefit of certain classes of privileged home-producers. They can sell alone (monopoly) just so far as other sellers are kept out by these heavy taxes. The goal of all their striving is to get an artificially-enhanced price for their own products at the cost of their countrymen by means of a market restricted to themselves through obstacles excluding foreign sellers. ”

“ The Chief Justice has shown, in the Standard Oil case, as plainly as it can be made, that undue prices are prices that result from monopoly, because the normal or proper price, the non-excessive price, is the price fixed in free competition. ”

“ In vain the protectionists say that there is not a real monopoly in the whole country; that every instance of extortionate price calls out competition at once, and injures the trust which charges such price; that protection benefits the small and poor companies as much as the large, and that an attempt to injure the large companies by free-trade enactments would kill all small companies on the instant. ”

“ If he increases the price, consumption will fall and so will his net profit. Competence in a monopoly therefore consists in finding (by the trial-and-error method) the exact profit-yielding ratio between price and performance. The profit-and-loss statement of a monopoly business reflects only in part the service it has rendered Society; it also includes an exaction price made possible by the scarcity it is able to cause. [1]
The key to monopoly is scarcity. Some scarcities are natural, such as mineral deposits and land sites; there is no way for humans to duplicate them. ”

“ With these facts made public, if any monopoly ventured to raise its price till it reaped unusual profits, some of the heaviest consumers of the monopolized product would be very apt to start a factory of their own in opposition. ”