Big Businesses and Monopolies of the 1800's Essay

Big Businesses and Monopolies of the 1800's - Essay Example The main industries, steel, mining, sugar, transportation, agriculture, ship-building, wine etc., were under monopoly control in all states before the new initiative which came at the beginning of the 20th century. Under conditions approximating pure competition, price was set in the marketplace. Price tended to be just enough above costs to keep marginal producers in business. Thus, from the point of view of the price setter, the most important factor was costs. If a producer's cost floor was below the prevailing market price, the product would be produced and sold. Since the producer in such a market had little discretion over price, the pricing problem was essentially whether or not to sell at the market price. Monopoly steel industry and sugar production was closely connected with nature of competition and inability of competitors to introduce new competitive products to the market. While costs and demand conditions circumscribe the price floor and ceiling, competitive conditions helped to determine where within the two extremes the actual price should be set. Reaction of competitors was the crucial consideration imposing practical limitations on pricing alternatives (Slichter 1948). During the 1800's, 'natural monopolies' existed in some industries. ... More specifically, a cartel was a voluntary association of producers of a commodity or product organized for the purpose of coordinated marketing that was aimed at stabilizing or increasing the members' profits. A cartel was engage in price-fixing, restriction of production or shipments, division of marketing territories, centralization of sales. Many small companies had the right and obligation to take action that protected and fostered the prosperity of the businesses, but they followed 'silent market and ethical rules' which helped them to compete (Witzel, 2003). While costs and demand conditions circumscribed the price floor and ceiling, competitive conditions created by monopolies helped to determine where within the two extremes the actual price should be set. For instance, if accompany set high price reaction of competitors and buyers was often the crucial consideration imposing practical limitations on pricing. Such behavior considered unethical and was discouraged by partner s and buyers (Hansen, 1957). There were times when a company in such a competitive structure ignored competitive prices. Such activities were also discouraged and eliminated which opened new opportunities for rivals. In addition, poor market performance was also considered as a restraint on competition and the main cause of monopolies (Witzel, 2003). The transport sector brought with it all kinds of difficulties, not least the highly regionalized nature of provision, the large amounts of money invested in existing grid systems and the obligation of local authorities to secure transport provision. Subsidized production of coal and ore, overcapacity and cheap