Essay on Pure Competition and Monopoly
Number of words: 716
In perfect competition, the firm is the price taker. What this means that the business has to accept the prevailing equilibrium market prices. If the enterprise were to adjust its price to more than the market price, it would not make any sell. Besides, in pure competition, there is free entry or exit from the market. There are no barriers to trade. On the other hand, a monopoly exists where there is one firm in the entire market. However, from a regulatory point of view, a monopoly exists when a company controls more than 25% o the market (Porter, 2016). In a monopoly, there are barriers to trade. The monopoly determines its prices. Monopoly is prevalent in firms dealing with technologies and software.
Article summary and relationship to the topic
In 1969, the United States anti probe agency opened charges against IBM, which lasted for 13 years. By then IBM was the most prominent producer of computer accessories. The case was later dropped. In 2001, Microsoft was accused of attempting to create a monopoly by forcing all computers to be installed with the Microsoft operating system. Currently the android control more than 80 % of the entire market. The other notable player is Apples IOS, which is more popular in the United States and the UK. Microsoft even failed in its attempt to rival Google’s Android. In fact, it was forced to recall its Smartphone due to low sells. According to Microsoft’s Satya Nadella, there is no market, which is as prone to Monopolies as the Smartphone market. Whoever controls the operating system controls the app store and thus determines what is to be found in the app store. In our understanding of a monopoly, this can be considered as the barrier to trade. The monopoly puts in mechanisms and measures that prevent other firms from entering the market. Facebook is the most significant social media network in the world. The owner, Mark Zuckerberg perhaps to cushion himself against the app being banned by Google on the play store, he bought other three applications. He is the owner of Instagram, Whatsapp, and messenger. Consequently, this makes it highly improbable for Google to ban the four apps, which are the most downloaded in the app store. Through this, the firm attempted to differentiate its products. However, there are possible tensions between Google and Facebook, in light of Facebook’s decision to adopt the internet neutrality.Facebook wants to make the internet more accessible to people in the developing countries. Whatever will happen is yet to be seen. Recently Google blocked all of its ad blocker apps in the app store, which was contravening the company’s policies. It also threatened t excommunicate Acer for running Alibaba operating systems. The other day the Russian government started charges against Google for misusing the market.
From the article, it is clear that the software market is a ‘Winner takes it all’ market (Kuchinke & Vidal, 2016). While the market has characteristics of a monopoly, it also has features, which are associated with pure competition. No one controls the prices; the market rates determine the prices of the commodities. This is why the consumer is at liberty to either purchase a phone running the Android operating system or the Apple’s IOS.There are also other small operating systems like the Tizen, although they have been unable to impact large segments of the software market. Again has it has been shown there are high barriers of trade in the software market. Google tries to make it hard for other firms to enter into the market. Usually, monopolies are free from government controls, but with the Russian government initiating probe charges against Google, this remains to be seen. It is not straightforward to classify the software market as either a monopoly or pure competition. Careful consideration should be given to other key determinants of the market.
Kuchinke, B. A., & Vidal, M. (2016). Exclusionary strategies and the rise of winner-takes-it-all markets on the Internet. Telecommunications Policy, 40(6), 582-592.
Porter, T. (2016). States, markets, and regimes in global finance. Springer.