Monopolies are increasingly forcing Australian consumers to settle for little choice, low quality and high prices. Tighter controls on mergers could flip the story.
As a parent, I hate the boardgame Monopoly. It never takes long before one lucky player has bought up a slab of real estate, and the rest are mortgaging their properties just to survive. No matter how happy the kids are when they start the game, it invariably seems to end up in tears.
As it turns out, that’s how most economists feel about real monopolies. From the British East India Company to Standard Oil, monopolies produce too little, and charge too much. Like the strongest kid in the schoolyard, they sometimes throw their weight around – threatening to bankrupt or buy off competitors. Monopolies can become fat and lazy, living off their dominant market position rather than looking for ways to produce better and cheaper products.