How a television monopoly ended in mediocrity

Thursday, June 25, 2009

The standard neo-classical theory presents a monopoly as a “bad” entity that will lead to inefficiency in the form of higher prices, lower consumer surplus, abuse of market dominance, x-inefficiency, etc etc…

Then there is the counter-argument which posits ideas such as monopolies are “good” as they allow higher supernormal profits, which can be used for R&D to create more innovative products, which are of a higher quality etc.

Here is an interesting article in the Financial Times by John Kay that looks at the issue of monopoly from a novel perspective, applied to the television industry through the example of the book industry; and looks at the issue of allowing more competition. More competition and choice may not always be better for the consumer, since with more competition comes a desire to chase market share at the expense of quality.