The New Market Structure: Globalization

Abstract

Another problem which has plagued markets and mainstream economic theory is Monopoly or Oligopoly. In practice, though with only limited success, monopoly has been subjected to a great volume of corrective legislation. One difficulty was how to distinguish between natural and administered monopoly, and another how to deal with firms which, though they are acting independently, are aware of their mutual interdependence of sales, production, investment and even advertising plans, and arrive at their decisions on the basis of the expected behaviour of their rivals. These problems were recognized and some neoclassical models were designed to take account of them and even of extreme situations when rivalry is replaced by co-operation and collusion. It can therefore not be said that neoclassical price theory ignored monopoly and oligopoly, but it treated them as the exception, not the rule. In reality however, oligopoly is no longer an anomaly.