Saturday, March 29, 2014

Chapter 17 Reflection


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?

No comments:

Post a Comment