Search the Community

Hello!I have a question about monopolies: Let's say that all food producers in the world work together, and decide to not sell food to anyone unless they decide to give the producers all their present and future wealth; how would the market solve this? Thank you!

I have heard the argument that there has never been a real monopoly without government involvement. However my friends have told me otherwise (although I cannot remember their exact examples), and a good friend of mine put forward the case why we need government regulation of business in order to avoid monopolies. I was wondering if you could help me evaluate his reasoning, so here goes. My friend used the example of an airline company in Norway-- which is a small country where you can fly most places within an hour on domestic flights-- in order to explain why regulation is needed. Let us say that airline company "X" does really well and becomes a really big company, and virtually drives out all competition on domestic flights. Then, my friend says, this company can charge high prices for a flight that used to be cheap. "Nonsense", I say, "then competitors will rush to the field and offer flights that are cheaper, which will attract consumers". Then my friend says that all this big powerful company has to do is to dump the prices until they drive their competitors out of business. They will be able to do this because of the surplus they have from being successful for some time. This way they can become monopolists by dumping the prices to such a low level that nobody can compete with them, whenever competition arises. When competitors again are out of the way, they can go back to their high prices. Thus, my friend says, we need government to regulate so that no company becomes big enough to do this. Have anyone encountered this "price dumping argument" for government regulation before? Or seen this happen in real life? Any good counter responses to this argument?