Oligopolies and public policy
1. Is the offer of a payment initiated by the payer (the one who pays the money), or does the payee (the one who receives the money) demand the payment by threatening injury to the payer's interests? In the latter case, the payment is not a bribe but a form of extortion. If the threatened injury is large enough, the payer may not be morally responsible for his or her act, or the moral responsibility may at least be diminished.
2. Is the payment made to induce the payee to act in a manner that violates his or her official sworn duty to act in the best interests of the public? Or is the payment made to induce the payee to perform what is already his or her official duty? If the payee is being induced to violate his or her official duty, then the payer is cooperating in an immoral act because the payee has entered an agreement to fulfill these duties.
3. Are the nature and purpose of the payment considered ethically unobjectionable in the local culture? If a form of payment is a locally accepted public custom and there is a proportionately serious reason for making the payment, then it would appear to be ethically permissible on utilitarian grounds.
Oligopolies and Public Policy
What should society do in the face of the high degree of market concentration in oligopolistic industries? There are three main points of view:
First, the Do-Nothing view claims that the power of oligopolies is not as large as it appears. Though competition within industries has declined, they maintain that competition between industries with substitutable products has replaced it. In addition, there are "countervailing powers" of other large corporate groups, the government, and unions that keep corporations in check. Finally, they argue that bigger is better, especially in the current age of global competition. Economies of scale, produced by high concentration, actually lower prices for consumers.
Second, the antitrust view argues that prices and profits in highly concentrated industries are higher than they should be. By breaking up large corporations into smaller units, they claim, higher levels of competition will emerge in those industries. The result will be a decrease in collusion, greater innovation, and lower prices. Clearly, the antitrust view is based on a number of assumptions. J. Fred Weston has summarized the basic propositions on which this traditional view is based:
1. Concentration results in recognized interdependence among companies, with no price competition in concentrated industries.
2. If an industry is not atomistic with many small competitors, there is likely to be administrative discretion over prices.
3. Concentration is due mostly to mergers because the most efficient scale of operation is not more than 3 to 5 percent of the industry. A high degree of concentration is unnecessary.
4. There is oligopolistic coordination by signaling through press releases or other means..
5. Concentration is aggravated by product differentiation and advertising. Advertising is correlated with higher profits.
6. There is a positive correlation between concentration and profitability that gives evidence of monopoly power in concentrated industries-the ability to elevate prices and the persistence of high profits. Entry does not take place to eliminate excessive profits
The third view is the Regulation view, which is able to be seen as a middle ground between the other two. Those who advocate regulation do not wish to lose the economies of scale offered by large corporations, but they also wish to ensure that large firms do not harm the consumers. Thus, they suggest setting up regulatory agencies and legislation to control the activities of large corporations. Some even propose that the government should take over the operation of firms where only public ownership can give assurance that they operate in the public interest.
Whichever view we take, clearly the social benefits of free markets cannot be guaranteed, and the markets themselves cannot be morally justified, unless firms remain competitive.