Question

The Competition Commission of Mauritius has been dealing with a number of cases of alleged exploitative monopoly behavior by firms in Mauritius. On the basis of relevant cases, analyse the view that although monopolies can be good, yet governments need to regulate them as they can often be evilish and they can affect the interest of consumers.

Answer 1

The monopolies, if not regulated, can set prices very high. The customers in this situation have no choice but buy the goods at the given prices as there are no other options or sellers available. Mauritius is a small and isolated island and so it is even more important to regulate the monopolies here. As we know that in monopoly the prices are set high and quantity of goods produced are less, this may deter the firm from achieving economies of scale which may make it less efficient. Less efficient firms are bad for the economy as a whole. It might also be possible that after getting a patent a firm might stop investing in research and development. This will result in less innovation and hence less technological advancement. If the government doesn't regulate the markets, because of lack of innovations people would have to continue buy the less efficient goods despite knowing that the are not recieving value for money. Sometimes there might be a monopoly but the firms would just collude in order to get the benefits if the monopoly, this will make the consumers even more worse off. A monopoly firm has a lot of power so if it remains unregulated, it can be very dangerous for the economy. The consumer surplus declines in monopoly. For example, there is no army in Mauritius. The security is sole responsibility of Mauritius Police Force, therefore, recently there have been cases where people are disappointed by the authorities as there are a lot of cases of bribery and government intervention. This situation could be a result of too much power that MPF has.