PATTERNS OF CHANGE

Market Model Patterns of Change

Market Model Patterns of Change

Introduction

Telecommunications have a long history of folding and reshaping space that extends to the telegraph in the mid 19th century and the telephone in the late 19th and 20th centuries. Today, the collection, transformation, and transmission of large volumes of information constitute a fundamental part of contemporary economies. The majority of jobs in industrialized nations consist of information processing in one form or another. These functions have increased in importance as computing has dramatically declined in cost and risen in power, the production of all goods and services has become more information intensive, technological change accelerated, product cycles shortened, and a deregulated, worldwide market has increased uncertainty and accelerated the competition among places for investment and jobs (Warf, 1995). This paper discusses the change in the market of telecommunication industry from monopoly to a perfect competition.

Discussion

A monopoly is a type of market characterized by the existence of a single company is a supplier of a good that has no close substitutes. By controlling the only company in the market, the monopolist can exercise market power, i.e. determining the amount that is offered in the market and, by this means, can influence the price of the product/service. Producing/offering small quantities of goods/services achieves the high prices and monopoly gains. In a perfectly competitive market, the demand and supply curves intersect at point E, determining the quantity and price of market balance: QE and PE.

In a monopolistic market, the monopolist, being the only supplier of the goods it produces, can reduce the quantity supplied of the same, for example through QM. A minibus on the demand curve to the point M, we find that the monopolist can sell that amount of product at the price PM, above which corresponds to the case of perfect competition. Thus, the monopolist is increased benefit. However, in the case of perfect competition this power does not exist, because perfect competition markets have many bidders (producers). This means that the perfectly competitive firm is a price taker, facing a perfectly elastic demand curve (Denzau & Mackay, 1983).

The individual bidder a competitive market can sell its product at price PE determined in the market, regardless of how much to offer individually. One would think that if companies get greater benefits monopolists other employers would want to invade the market in order to obtain higher profits. However, as noted above, in monopoly markets there are significant barriers to entry. This means that there are impediments, which prevent the entry of new firms into these markets, such as economies of scale in production (activities where it is not possible for others to produce even at a small-scale), the technological superiority (activities where one faces development difficulties while developing technology), control of resources needed for production (e.g. geographic location or control of a resource such as oil) and the restrictions imposed by legislation. Monopolies arise in markets where there are fixed costs of production ...