Monopoly for the Potato Chip Industry A monopoly is a company that provides a product or service for which there are no close replacements and in which significant barriers of entry can either prevent or hinder a new company from providing competition (Case, et al., 2009). Take into consideration the potato chip industry in the Northwest are not only competitively structured but are in long-run equilibriums. The firms were earning a normal rate of returns and were competing in a monopolistically competitive market structure. In 2008, two lawyers quietly bought up all the firms and then began operations a monopoly called “Wonks”. For them to operate efficiently they had to hire a management consulting firm, which will estimate the different long-run competitive equilibrium. With this change comes several important things to consider that will be effected one being the stakeholders involved, price changes and the market structure to be most beneficial to the new corporation. By consolidating the oligopoly members of the Northwest potato chip industry, located in the United States, the legal professionals created a monopoly (Lindblom, 1948, p. 671). By taking away competition in the region, Wonks would now control their position on the market demand curve, where they can go from the produced quantity, to price point, even to where the product can be sold. Monopoly by definition is, “exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices,” (Monopoly, 2012). In all actuality a package product like a potato chip could not hold market domination for long. Other manufacturers will transport their product into this region like paying slotting allowances, in order to obtain products for placement on the supermarket shelves. An industry that that comprises just one firm producing a product for which there are no close substitutes are called monopolies (Case, et al., 2009). Although a monopoly has
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Case, K.E., Fair, R.C., and Oster, S.E. (2009). Principles of Microeconomics. (9th ed). Upper Saddle River, New Jersey: Pearson Prentice Hall.
Lindblom, Charles E. The Union as a Monopoly. The Quarterly Journal of Economics , Oxford University Press Vol. 62, No. 5 (Nov., 1948), pp. 671-697
Monopoly. (n.d.). Collins English Dictionary - Complete & Unabridged 10th Edition. Retrieved October 08, 2012, from Dictionary.com website: http://dictionary.reference.com/browse/monopoly