Monopoly and Resource Allocation

  • A. C. Harberger


One of the first things we learn when we begin to study price theory is that the main effects of monopoly are to misallocate resources, to reduce aggregate welfare, and to redistribute income in favor of monopolists. In the light of this fact, it is a little curious that our empirical efforts at studying monopoly have so largely concentrated on other things. We have studied particular industries and have come up with a formidable list of monopolistic practices: identical pricing, price leadership, market sharing, patent suppression, basing points, and so on. And we have also studied the whole economy, using the concentration of production in the hands of small number of firms as the measure of monopoly. On this basis we obtained the impression that some 20 or 30 per cent of our economy is effectively monopolized.


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© Macmillan Publishers Limited 1995

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  • A. C. Harberger

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