Monopolies and Competition

What is a monopoly? Monopoly power has been called the power to set prices. Monopolists have the ability to charge almost any price they want resulting in the increase of the profitability of monopolistic firms. There are multiple problems monopolists may face within their firm. If prices are too high the number of people who are able to afford the product decreases. High prices and low sales cause the fixed price per item to be large. With this is mind, monopolists may choose to have lower prices and greater volume to reduce the fixed cost per item. The second danger that limits how high a monopolist is able to raise his price is that it will encourage competition or the substitution of other products by the consumer. When this occurs some firms must change their product for a more practical one.

One example of a monopolistic firm is Wal-Mart where they have selections for every need at low prices. Wal-Mart is a corporation in which is in competition with chains such as Target, and Kmart. Wal-Mart advertises they are the low price leader and is in competition to sell that which they sell at better prices for common people than that in which their competitors may sell. As a whole, firms in competition with one another are selling from the name of their for the reason that they all have the same product, but people will want to by from a specific business depending on slight price difference,their customer service, and the way by which the store is ran.

A second example of a monopolistic firm is Target. Target also advertises low prices for any household item, beauty product, or music etc. It is in competition with that which Wal-Mart is able to provide, but for many customers it offers a better environment, and better customer service. "Expect more of everything: More great design, more choices, more convenience, more service and more clothes, housewares and designer-created items that you’ll never find anywhere else. And pay less. It’s as simple as that." This is the general philosophy of the Target chain and it is through their sales and production of the store that keeps the competition going for Wal-Mart as well.

Kmart is the third example of a monopolistic company. They as well offer low prices and the same products that can be found at Wal-Mart, and Target, but it is within each of these stores that something different must be offered in order for there to be business within each corporation. As mentioned earlier, customer service plays a very significant role as well as the general up-keep of the store. Who wants to buy a product where the isles are filthy and products are falling off the shelves? No one does. "OLDE fits into Kmart's philosophy because it is a growth company that is very consumer-oriented." Much of Wal-Mart's production has taken over that which Kmart offered, but many still, depending on preference and the region of the store, continue to purchase their necessary goods from the low prices that Kmart offers.

Wal-Mart, Target, and Kmart offer the same products at either the same or very similar prices, as well as different forms of customer service, and store policies, but each have had positive and negative affects within the economic health of this country. Each corporation has enabled American families to purchase necessities and consumer products such as toiletries, food, small appliances, sporting goods, and clothing at reasonably lower prices. American families, with the influence of these prices and consumer goods, are able to get more for their money. Unfortunately these large, and competitive corporations have put smaller, independently owned stores out of business such as bicycle shops, tire shops, and hardware stores etc. These stores once offered personal and quality customer service that these larger corporations are unable to provide. The government is appropriate in their actions toward monopolies for if it were not, there would be an overflow of large corporations and smaller businesses would not be able to stand within the economy at all.