1. What do you think about anti-trust laws with respect to
the cell-phone industry? Do you think
the cell phone industry could be an oligopoly? Why or why not?
2. Take a few moments to explain how a decision box
works. What about Oligopolies is most
unclear to you?
I think
that anti-trust laws are important to regulate the cell phone industry just as
they are for all other oligopolistic enterprises. If anti-trust laws were not in place this
would allow AT&T to have a monopolistic hold on the cell phone
industry. According to a press release
on the Department of Justice’s website (31 Aug. 2011), their position holds as “the
proposed $39 billion transaction would substantially lessen competition for
mobile wireless telecommunications services across the United States, resulting
in higher prices, poorer quality services, fewer choices and fewer innovative
products for the millions of American consumers who rely on mobile wireless
services in their everyday lives.”
The one
example of a controversial business practice that relates to cell phones is
tying. This practice is one of three
from our text that anti-trust laws can regulate. When Apple introduced the cell phone they had
a type of software installed on the phone that only made it possible for the
phones to use AT&T’s network. A
federal and state lawsuit ensued claiming violation of anti-trust laws. Since then iphone’s have become available on networks
such as Verizon, Sprint, T-Mobile, StraightTalk, Net10 and others I’m sure I’m
not aware of.
Since
anti-trust laws are in pursuit of curbing monopoly power, I think it is
important for cell phone companies to be regulated since some to the
disadvantages of monopolistic power are higher prices, restriction of other new
innovative products to the market, reduction in economic welfare and fewer
consumer choices. Personally, I just got
my first iphone in Dec. 2013 and live in a place where AT&T coverage is
non-existent. If it weren’t available on
the Verizon network, I’d never had had the opportunity to use an iphone.
In
regards to the cell phone industry as an oligopoly, I think it already does
exist as one. AT&T, Sprint, Verizon
and T-Mobile currently control almost 90% of the country’s cell service market. To answer this question in respect to a
monopoly, the answer would be no. Just
like the antitrust suits Microsoft has faced as far as integrating their Internet
browser into their operating system was dismissed because it would have created
too much market power, the same would be true if the government allowed
AT&T to purchase T-Mobile or any other carrier.
A
decision box is used in game theory. Our
text defines game theory as “the study of how people behave in strategic
situations.” When a situation calls for
strategic thinking, people use the information they have to design the best
possible plan to reach their objective. Game
theory is sort of a version of a cost-benefit analysis one would use to make a
decision. The only real difference is
that game theory, as specific to oligopolistic competition, encompasses
decisions that are interdependent among the other firms. A decision box is the illustrative expression
of such a process.
What is
most unclear to me about oligopolies is collusion. Under what circumstances is collusion
illegal? In a certain sense is it just
frowned upon? Why is price-fixing
illegal to even mention in conversation?
Wouldn’t there have to be evidential support to get someone in trouble?
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