Economics-Market Power, Oligopoly, Monopoly Essay

Economics-Market Power, Oligopoly, Monopoly - Essay Example Depending on the premise and circumstances of the discussion it can be reasonable to argue that competition is socially harmful as compared to market power. However, the argument against competition is very weak since empirical evidence and data shows the competition has more economic benefits and support for the development of the market than a single firm holding and dominating market power over an industry. This is because there are several benefits which can be gained from having some competition in a market. For instance, competition may force prices to go down for the consumer if a lower cost producer competes in the market. Additionally, a better product might be entered into the market with actually superior or perceived superior quality. The combination of these two factors can create products which are innovative, desirable and can cause the emergence of brands within an industry. At the same time, competition may be unnecessary or wasteful if the product differentiation is very low. For instance, the battle between Coke and Pepsi for market share seems to be wasteful since the products they are marketing are very similar to begin with. However, advertising can be socially effective when the products are dissimilar and offer different benefits as in the case of computer operating systems like the ones created by Apple, Microsoft and Linux.