RESTRAINTS ON MONOPOLIES
It will perhaps seem that the monopolist would be able to charge whatever price he liked. his sole consideration being to maximise his profit regardless of social welfare. But the monopolist cannot, ill actual practice. behave like an autocrat. There arc several checks on the abuse of monopoly power: In the first place. a monopolist IS always afraid of potential riyals. If He charges too high I price other entrepreneurs will surely enter the field to take advantage of the high price and wrest from him a shale of the high profits that he the consumers may not take it Lying down . There is a limit to their exploitation. An increase of one l’aise in the price may prove to he the last straw on the camel ‘s hack. acth cyl organise’ a htJ cutt. No monopolist can afford to alienate the sympathies of his customers.substitutes. more ur lc satis latory. cannot he found. The monopolist’s greed can he effectively checked resort to substitutes. to allow a certain margin between the monopolized product and the that margin is exceeded. thc substitute come. conditionals of land and take independent unilateral action Ik is bound to consider at every step the state If rhc clastic, the monopolist’s correspondingly weak. Flhl we have seen that a combination (i.e., monopoly) is constantly threatened by forces from within. It is not so easy to maintain a combination. It is usually a house divided against itself and they cannot, therefore, do as they please. Fill All there is the fear of State intervention. The State. as the custodian of the interests of the general public. cannot allow a monopolist to exploit the community. If need be, it is prepared to intervene.This acts as a wholesome check on the autocratic tendency of the monopolist. Summing up, Thus. the price-output policies of the monopolist are constrained by the threat of potential competition. competition from close substitutes and by indirect competition from all commodities that can be purchased with consumer’s income and fear of state intervention.
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