Economic Logic ( 2014 ) Essay examples

1215 Words Jun 23rd, 2015 5 Pages
According to the book Economic Logic (2014), monopoly power refers to the ability of an individual or firm to manage and maintain the market price of goods or services above the level that would prevail under competition. Therefore, it would appear that if two rival companies decided to merge, most of the competition would most likely be eradicated (Skousen, 2014). By eliminating or minimizing the competition, the merged companies would become more prominent than the rest of the market. For this reason, it would be practically impossible for either business to avoid or deny an increase in market power over a period of time.
Nevertheless, the merged organizations can develop a new product or provide a new service, in order to avoid a rise in market power. For instance, if the merged companies develop a new product or service similar to the original product or service, yet cheaper, then, consumers would be inclined to want the new product or service. This particular strategy, would not only entice consumers to purchase the new product or service, it would also, assist the merged companies to refrain from increasing their market power. Not to mention, that this strategy would also influence customers to advance and eventually purchase the higher end product.

Fortunately, according to Professor Lerner, an organization’s monopoly power can be measured to an extent, by examining the relationship between elasticity and the price margins (Guru, 2015). Moreover, his theory states…

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