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< Back to question Do tech monopolies stifle or spur innovation? Show more Show less

A technological monopoly occurs when one company exclusively controls the right to sell a service or product. A company that holds a technological monopoly is free to set prices as high or as low as they want, due to the lack of competition in the given field. This debate is centered on the role of the government in the economy and whether tech companies have an incentive to self-regulate their innovative capabilities.

Tech monopolies have a financial incentive to innovate. Show more Show less

Tech monopolies must constantly innovate to develop products that the public will want to use.
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The AT&T example

AT&T's monopoly in the 20th century allowed it to make technological strides.
economy monopoly technology
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The Argument

AT&T was a large tech monopoly during much of the 20th century, controlling most of the communication market in the U.S. and Canada. The ability to set prices allowed AT&T to fund long-term research and development for some highly-regarded innovations, such as the transistor. Without the ability to set prices, AT&T would not have had the necessary capital to fund long-term projects like the transistor. The transistor took more than 15 years before it began to develop into what it is today: hardware used in nearly every digital computer.[1] A smaller tech company without a monopoly would not be able to invest the resources needed for long-term innovations like this because the effect it would have on their bottom line would not be sustainable. Further, these long-term innovations foster others: the transistor developed in the 1940's gave rise to the microchip developed in the 1960's.

Counter arguments

This is assuming that the company relies solely on its monopoly for profit. If a company is large enough, it may have the ability to diversify its assets without innovation.

Premises

[P1] Monopolies will use the profit that they obtain through price-setting to fund research and development, because if they don't another company may create something that makes their entire monopoly obsolete.

Rejecting the premises

[Rejecting P1] Though they may use some of the profit for innovation, the immense amount of capital at their disposal allows them to simply buy out competitors when they begin to appear.

References

  1. https://hbr.org/2005/12/no-monopoly-on-innovation

This page was last edited on Thursday, 16 Apr 2020 at 12:19 UTC

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