Contrasted With Other Monopolies
Exclusive control of electricity supply due to government imposed "utility" status is a coercive monopoly, because users have no choice but to pay the price that the monopolist demands. Consumers would not have an alternative to purchase electricity from a cheaper competitor, because the wires running into their homes belong to the monopolist. Exclusive control of Coca-Cola would not be a coercive monopoly because consumers have a choice to drink another brand of soda, and the Coca-Cola company is subject to competitive forces. There is an upper limit to which the company can raise its prices before profits begin to erode because of the presence of viable substitute goods.
Contrastingly, for a non-coercive monopoly to be maintained, the monopolist must make pricing and production decisions knowing that if prices are too high or quality is too low competition may arise from another firm that can better serve the market. If it is successful, it is called an efficiency monopoly, because it has been able to keep production and supply costs lower than any other possible competitor so that it can charge a lower price than others and still be profitable. Since potential competitors are not able to be so efficient at producing, they are not able to charge a lower, or comparable, price and still be profitable. Hence, competing is possible but doing so is not profitable; whereas, for a coercive monopoly, competition is neither profitable nor possible.
Read more about this topic: Coercive Monopoly
Famous quotes containing the words contrasted with and/or contrasted:
“... when I exclaim against novels, I mean when contrasted with those works which exercise the understanding and regulate the imagination.For any kind of reading I think better than leaving a blank still a blank, because the mind must receive a degree of enlargement and obtain a little strength by a slight exertion of its thinking powers ...”
—Mary Wollstonecraft (17591797)
“It is old age, rather than death, that is to be contrasted with life. Old age is lifes parody, whereas death transforms life into a destiny: in a way it preserves it by giving it the absolute dimension. ... Death does away with time.”
—Simone De Beauvoir (19081986)