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< Back to question What are the pros and cons of monopolies? Show more Show less

The word monopolies has negative connotations in economic history, but recently monopolies have been praised by people such as Warren Buffett and Peter Thiel. The arguments for and against are not new, but now they have better empirical support.

Monopolies are damaging to economies Show more Show less

Monopolies choke economies: competition is central to a healthy economic system
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Monopolies reduce wages for workers

Monopolies or tight oligopolies have pricing power as well as market power, thus giving them the ability to reduce their workers' wages.
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The Argument

Monopolies or tight oligopolies have "pricing power" according to Warren Buffett. This is well documented in economic literature. What is less understood or considered is that they also have market power over workers. Research by Jose Azar, Marshall Steinbaum and Ioana Marinescu shows that commuting zones that are more concentrated have lower wages. While some monopolies like Google and Facebook may pay workers well, these are the exceptions rather than the rule. Also, monopolies in product markets are often monopsonies in labor markets, i.e. they are only one buyer of labor.

Counter arguments


Rejecting the premises


    This page was last edited on Sunday, 7 Jun 2020 at 00:45 UTC


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