Economic Reality versus Consumer Perceptions of Monopoly

Abstract

When a Senate committee considered regulating access to a popular National Football League (NFL) broadcast in 2007, the context was familiar to marketers: accusations of abusing monopoly power. The specific issue of NFL telecasts was eventually resolved outside the public policy arena, but it raises a more general question: What “monopolies” should governments regulate? Antitrust laws in the United States arose from a desire to protect competition. However, public policy is beginning to apply them in marketplaces that are monopolies only in the sense that consumers perceive a lack of competition, even though, in actuality, competitors are free to operate. Examples range from the NFL to iPod to De Beers. The authors refer to the dominant suppliers in these markets as “psychological monopolies” created by consumer beliefs and feelings, not by economic reality. The authors argue that the regulation of such monopolies is misguided.