Courses : Intermediate Microeconomics Lecturer : Frischa Adellia Semester : 4th Semester, 2022/2023 Sesion Modern Monopoly Theory Modern Monopoly Theory sees monopoly as the result of a firm's competitive advantage over its competitors. This advantage can be obtained in various ways such as developing new technologies, effective marketing, or having access to scarce resources. In this theory, monopoly profits derive not only from a firm's ability to charge higher prices, but also from its ability to produce higher quality goods and services at lower costs. Modern Monopoly Theory also highlights the importance of innovation as a tool that drives competitive advantage. Companies that are capable of generating innovation can develop new markets, reduce production costs, and improve their overall performance. However, this theory also emphasizes that competitive advantage can end and competition can emerge at any time. Therefore, companies must continuously innovate and improve their efficiency to maintain their position in the market. Modern Monopoly Theory sees monopoly as the result of superiority gained through technological innovation and development. Modern monopolies often arise in industries that are closely related to research and development, such as information technology and pharmaceuticals. According to modern monopoly theory, technological development and innovation create barriers to entry that are higher than production costs and capital costs. As a result, companies that are already established and have technological advantages will find it difficult to be replaced by new competitors. Modern monopoly theory also highlights the importance of intellectual property rights in creating monopolies. Patents, trademarks and copyrights allow companies to exclusively control the production and distribution of their products. However, some economists are skeptical about the modern monopoly theory. They argue that innovation and technology do not necessarily create monopolies, and that competition is still possible despite technological differences between firms. Modern Monopoly Theory, also known as New Monopoly Theory, proposes that monopoly power stems from factors such as technological innovation, economies of scale, control over key resources, and high barriers to entry. According to this theory, monopoly can arise because of a competitive advantage possessed by certain companies, such as better technology or a more famous brand. These factors allow companies to market their products at a higher price and thereby earn high economic profits. In addition, monopolies can also arise due to significant economies of scale. Large companies can produce goods or services at a lower cost per unit than small companies, so they can sell their products at a lower price and still make a profit. In addition, monopolies can also arise due to control over key resources. If one firm controls a critical resource needed by a particular industry, such as raw materials or infrastructure, then that firm can use its power to limit competitors' access and maintain high prices. Finally, monopolies can also arise due to high barriers to entry. If it is difficult for new firms to enter the market, then existing firms may retain power and market their products at a higher price. In Modern Monopoly theory, it is often criticized for not recognizing political power in creating and maintaining monopolies. Some economists argue that government support and certain regulatory policies can give large companies a significant competitive advantage and discourage entry of new competitors. The following are some of the characteristics of modern monopoly theory: 1. High barriers to entry: In modern monopoly theory, one of the main characteristics is the presence of high barriers to entry for new competitors. Barriers to entry can be in the form of large costs to start a business, strong patents or trademarks, technological advantages that are difficult to imitate, and so on. 2. Has market power: Modern monopolies have high market power, i.e. they are able to control the price and quantity of production in the market. This is because there are no comparable competitors so that the monopoly company has the power to determine the selling price of its product. 3. Negative influence on consumers: Because modern monopolies have the power to set prices and production quantities, monopolists tend to charge higher prices and lower production quantities. This can have a negative impact on consumers, because higher product prices can make consumers feel burdened. 4. Existence of price differences: In a modern monopoly, firms may charge different prices to different consumers. For example, a company could charge a higher price for consumers with higher purchasing power, while lower prices for consumers with lower purchasing power. 5. Presence of economic advantage: Modern monopolies tend to have high economic profits, due to the absence of comparable competitors. This allows the company to maintain high profits for a long time. 6. Existence of interdependence between firms: In a modern monopoly, firms tend to be interdependent on one another. This is because there are linkages in certain markets or industries so that decisions taken by one company can influence the decisions of other companies.