Discuss the view that although incumbent monopolies are likely to be inefficient, the pursuit of monopoly positions by oligopolistic firms is the main driver of innovation and increased efficiency in our economy

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Oligopolistic firms and innovation in our economy

Introduction

Oligopolies have increasingly played a key role in the modern business environment . Monopolies have contributed to the oligopolistic pursuits by these firms and they affect the economy in various ways . It is important to define monopolies and oligopolies in to understand the distinction between the two . A monopoly is a market which is characterised by the ability of the existing firms to control the services or goods which are provided , and decide who to

give access to Monopolies thus feature a lack of substitute for the products in the market and a lack of competition in the market . Most governments restrict monopolies due to the negative effects associated with them

On the other hand , oligopolies are markets or industries which have fewer sellers who influence each other to control the market (Lancaster and Withey 2006 : 140-145 . In this type of market , there are few sellers who monitor the actions of others , and this influences the decisions which they make . The decisions of one firm are therefore influenced , and influence decisions made by other firms

Weaknesses of monopolistic firms

However , as previously mentioned , monopolistic firms are deemed to have certain weaknesses , which necessitates their control by most governments . The major weakness of these types of firms arises from their ability to control the market . Due to this ability , they can exploit the market in to boost their profits . Since the monopoly market features no substitutes for...