What is the justification for the existence of powerful firms?
Dominant firms are those with a degree of monopoly power in their particular industries. Monopoly power is frequently criticised, as potentially it enables firms to exploit consumers by charging higher prices, restricting output or delivering low-quality products. It is often used as grounds for investigation of firms by the competition authorities.
A cursory read of an economics textbook might make you believe that markets are best served by small firms competing with each other on the basis of price, a model close to perfect competition. However, is it possible that the benefits of dominant firms outweigh the potential drawbacks?
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