Lets play Monopoly Regulating monopoly Antitrust policy in

Let’s play Monopoly! Regulating monopoly: Antitrust policy in the real world

After reading the article, answer: 1. Do you agree or disagree with the final contestants for the monopoly award? 2. How might e-mail change the market for first class mail? 3. What prevents a cartel, particularly OPEC, from maintaining a long-run monopoly? What would help make it more successful? 4. What are the standard arguments against monopolies? What example is provided to emphasize these arguments? 5. What is price discrimination, and under what conditions is it successful? 6. Why doesn’t the NCAA have competition in providing a forum for young athletes to play sports? 7. How does leaving college early to go pro, or going pro directly from high school, affect the NCAA monopoly? 8. Why are monopolies considered to be bad? Discuss price, output, and efficiency.

1. Do you agree or disagree with the final contestants for the monopoly award?

1. Do you agree or disagree with the final contestants for the monopoly award? • Personally, I never knew the NCAA was this bad, until I read the article

2. How might e-mail change the market for first class mail?

2. How might e-mail change the market for first class mail? • E-mail has increased competition for first class mail service by offering consumers a faster cheaper alternative. • Fax machines are another alternative to mail

3. What prevents a cartel, particularly OPEC, from maintaining a long-run monopoly? What would help make it more successful?

3. What prevents a cartel, particularly OPEC, from maintaining a long-run monopoly? What would help make it more successful? • Because of voluntary participation by members, the cartel has a difficult time convincing members to play by the rules. • Especially with OPEC the economic incentives are too great, not to undercut the cartel’s pricing system • Tougher restrictions on members would be necessary as well as better enforcement of rules

4. What are the standard arguments against monopolies? What example is provided to emphasize these arguments?

4. What are the standard arguments against monopolies? What example is provided to emphasize these arguments? • Monopolies are traditionally known for poor service and higher prices. • An example in the reading is the cable TV

5. What is price discrimination, and under what conditions is it successful?

5. What is price discrimination, and under what conditions is it successful? • Price discrimination is selling the same service for different prices. • It is successful if the service cannot be resold – Hotel rooms, airplane rides, college scholarships • It increases a monopoly’s output and profits • Ironically, it also makes the monopoly more allocatively efficient

6. Why doesn’t the NCAA have competition in providing a forum for young athletes to play sports?

6. Why doesn’t the NCAA have competition in providing a forum for young athletes to play sports? • What are the arguments for student athletes? • What’s the market for paying to watch people perform at less than the highest level, unless you have some allegiance to the organization the team represents? • What are the barriers of entry to competition? • Who benefits, who loses?

7. How does leaving college early to go pro, or going pro directly from high school, affect the NCAA monopoly?

7. How does leaving college early to go pro, or going pro directly from high school, affect the NCAA monopoly? • It does make it tougher on the NCAA. • In fact in 2002, it considered a proposal giving college athletes a $20, 000 interest free loan • But the NBA decided to no longer take high school grads, until one year had passed (college freshmen)

8. Why are monopolies considered to be bad? Discuss price, output, and efficiency.

8. Why are monopolies considered to be bad? Discuss price, output, and efficiency. • Monopolies charge higher prices and produce less than purely competitive firms • They are neither productively nor allocatively efficient. • Without competition they have less incentive to produce in the least costly way, – they can always reduce output to cover costs.