Welfare effects of a monopoly

Net welfare losses arise also in the private sector as a result of monopolies and oligopolies, since the consumers in a Monopolsitutation are forced to pay prices which lie over the Konkurrenzpreisen.

While the equilibrium lies in the Polypol with p_Pol/X_Pol, a higher price (p_Mon) must be paid in the case of monopoly, which leads to a smaller consumer quantity (X_Mon). The Konsumentenrente (KR) decreases/goes back due to the price increase and the quantity decrease clearly. The producer pension two opposite effects affect: On the one hand it decreases/goes back, since the monopolist can set off a smaller quantity compared with the Polypolisten only. On the other hand it profits from the possibility of being able to raise Monopolpreise.

Altogether is however a net welfare loss to recognize (characterized by the red surface ZL).

Classification and conclusions on the competitive policy

The statements of the welfare model for the case of monopoly are to a large extent undisputed - in most cases the disadvantages of a monopoly are opposite a Polypol out of question. Not to be considered here however further efficiency disadvantages: Thus a monopoly leads due to the missing competition pressure possibly also across other channels to welfare losses: Scientific studies show

• an often diminishing innovativeness with monopolists (i.e. he developed only slowly new, qualitatively improves products),
• a smaller productivity of the monopolist (i.e. large parts of its monopoly revenue are possibly consumed by Ineffizienzen in the production),
• a worse service than on and
• fewer product variations (i.e. the monopolist offers usually fewer modifications of the product to his customers, which could be more suitable for the respective customer needs). From this point of view it appears as important task of the competitive policy to prevent monopolies.

It may not be ignored that in certain cases a monopoly can be quite welfare optimal; like that it is e.g. conceivable that a national monopolist is more competitive due to its domestic monopoly revenues on foreign markets and thus possibly creates inland additional jobs (as example for this the close oligopoly on the German energy market could be e.g. stated). The moreover one it is conceivable that on some markets due to high fixed costs sufficient conversions are attainable for an enterprise only.

Model criticism

Net welfare losses are recognized predominantly in the neoclassical theory. Finally however still with some arguments dealt, which are concerned critically with the topic.

Net welfare losses are not in the long run only to be due to the collection of taxes. After some conception the suspicion would lie close that the Diffamierung of taxes as a cause from welfare losses to it serves, of increasing the power of the economy in relation to the state and its citizens and of promoting the public poverty.

According to keynesianischer view the income distribution determines the growth of production. Afterwards taxes increase production growth, if it flows to that consumers, whose consumer ratio is higher than the consumer ratio of the good-earning. That means: it is maintained that the need at consumer goods of the good-earning is relative to their incomes smaller and thus their savings behavior leads to the fact that too little consumer demand is unfolded, which leads in consequence to a leaving capital goods oh question.

After other aspect the model national interferences does not diffamiert, since it grants national incomes from taxes and tariffs an equivalent use like incomes of the private market participants. The model ignores national Ineffizienzen even in a well-meaning manner after aspect of its supporters - a Diffamierung does not take place therefore.

Literature

• Homburg, S.: General tax teachings, 3. Aufl., Munich: Vahlen, 2003 (S. 160ff.)
• Mankiw, N.G.: Fundamentals of the political economy, 3. Aufl., Stuttgart: Poeschel, 2004 (S. 175ff.)
• Varian: Fundamentals of the 5. Aufl., Munich: Oldenbourg, 2001

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