This scarcity, in turn, is used as justification for increased prices. For example, a manufacturer that has no direct competitors can limit its output, thereby producing artificial scarcity. Governments can also create monopolies in an attempt to reduce inefficiency in markets.Ĭompanies can also exhibit rent-seeking behavior even if not explicitly incentivized to do so. Rent-seeking behavior can be incentivized by monopolies, foreign trade restrictions and state subsidies. Though other forms of copy prevention aren't prohibited, legally requiring Macrovision effectively grants it a monopoly and prevents other, potentially more effective copy prevention methods from being developed.īackground of the role of government
In the Digital Millennium Copyright Act, for example, the proprietary Macrovision copy prevention technology is required for analog video recorders. Governments have granted monopolies to forms of copy prevention. Trademarks can act as a form of consumer protection that lowers the transaction costs between a buyer and seller who are not personally acquainted. Franchises granted by governments to operate public transit through public roads are another example.Ī trademark or trade mark is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or services from those of other entities. In many countries, lucrative natural resources industries, especially the petroleum industry, are controlled by government-granted monopolies.
Today, government-granted monopolies may be found in public utility services such as public roads, mail, water supply, and electric power, as well as certain specialized and highly regulated fields such as education and gambling. Under mercantilist economic systems, European governments with colonial interests often granted large and extremely lucrative monopolies to companies trading in particular regions, such as the Dutch East India Company.
#Pharmaceutical monopoly history free#
Government-granted monopolies may be opposed by those who would prefer free markets as well as by those who would prefer to replace private corporations with public ownership. Opponents often criticize them as political favors to corporations. Advocates for government-granted monopolies often claim that they ensure a degree of public control over essential industries, without having those industries actually run by the state. Īmongst forms of coercive monopoly it is distinguished from government monopoly or state monopoly (in which government agencies hold the legally enforced monopoly rather than private individuals or firms) and from government-sponsored cartels (in which the government forces several independent producers to partially coordinate their decisions through a centralized organization). As a form of coercive monopoly, government-granted monopoly is contrasted with an unregulated monopoly, wherein there is no competition but it is not forcibly excluded. In economics, a government-granted monopoly (also called a "de jure monopoly" or "regulated monopoly") is a form of coercive monopoly by which a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service potential competitors are excluded from the market by law, regulation, or other mechanisms of government enforcement. State-sanctioned monopoly by a private company
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