The Supernatural Monopoly Analysis

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The article written by Thomas J. DiLorenzo entitled The Myth ofNatural Monopoly, as the title states is about unravelling and explaining the natural monopoly myth. Natural monopoly is defined as a monopoly in which only a single firm can obtain the utmost benefit from the industry it is in. This usually happens when there is an extremely high fixed cost in production. As production increases, the long run average cost of production decrease as fixed cost is spread over the units produced. It would be more beneficial for the manufactured product to be produced by only one producer since more investors would possibly bloat the price considering the high fixed cost involved in manufacturing. Ideally, competition in the market is essential. In…show more content…
These are the electric utility industry, the telephone line industry and the cable tv industry. The electric utility industry is natural monopoly because no competition can exist in this industry. This notion was challenged by economist Walter J. Primeaux in his book Direct Utility Competition: The Natural Monopoly Myth. In his book he discussed the reasons why natural monopoly does not exist in electric utilities industry. There has been direct rivalry between 2 competing firms in the US for almost 80 years in certain areas. Despite this, prices have been low and very competitive. Further, residents have benefited from the competition since they are given quality customer service at a lower price. In the Philippines’ setting, particularly in Region XI’s, there are 3 Electric Cooperatives operating and 1 private corporation. One in every area namely Davao Oriental Electric Cooperative (DORECO) for Davao Oriental, Davao del Sur Electric Cooperative (DASURECO) for Davao del Sur, Davao Light and Power Corporation for Davao City and Davao del Norte Electric Cooperative (DANECO) for Davao Del Norte. These are the only providers of electricity in the Davao Region. Other possible investors may enter the industry but due to the high cost of investment required and the regulated distribution of energy and electricity, not too many are…show more content…
Monopoly in this industry in the US is caused by government intervention and not due to economies of scale. Direct competition still exists in this industry in certain areas of the US. Locally, there are several Cable television providers in Davao. They are Sky Cable, HomeChannel Network and Davao Cable World Network, Inc. This goes to show that there is no monopoly of cable tv providers in Davao. Each provider ensures that subscribers obtain the best service at a reasonable price thus there is healthy competition between them. Lastly, the industry most regarded as a natural monopoly is the Telephone Service Industry. As stated in the article, AT&T has been a major telephone service provider in the US for several years. It monopolized the market because there was connivance between the politicians and the company for their individual interests. In Davao, there are several telephone service providers, no monopoly exists in this industry here in the Philippines. I believe that natural monopoly does not and cannot exist in the market. It has been termed and will remain a myth. Even with the items cited, the theory that these industries are natural monopolies were clearly rebutted. It was even explained that competition between companies in these industries have given consumers great
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