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Global Economics with Monopolies and Oligopolies

1. Select a company that uses (or has used) dynamic pricing.Briefly explain how the company uses dynamic pricing. Discuss the benefits and drawbacks of dynamic pricing for that particular company. Conclude with a summary of your findings.

You have been contracted by a competitor of SBC to conduct some background research on SBC. Specifically, you have been asked to research, compare, and explain the similarities and differences of the breakup of the AT&T/Bell System antitrust problems that occurred in the 1980s to the recently similar problems with SBC/Ameritech. Add to this, the pending acquisition of ATT by SBC.

1. Explain the difference between a monopoly and an oligopoly, the welfare effects of monopoly, cost advantages that create monopolies, government actions that create monopolies, and government actions that reduce market power.

2. SBC and ATT are planning to merge. Apply the information fron the above question and explain whether the newly formed company will be a monopoly or oligopoly. What will be the welfare effects, if any, of this merger? What cost advantages might be created? What actions, if any, do you think the government will take? Be sure to support your answers with specific facts.

Solution Summary

This solution discusses the difference between a monopoly and an oligopoly and explains the four main cost advantages of monopolies. It provides predictions concerning the merger in the case study and uses Deccan airlines as a real-life example.