Monopolies are difficult and good – antitrust doesn’t solve anything.

But are these theories correct? Is there really a free-market monopoly problem? Assuming that we can even define what we mean by a “free-market monopoly,” it would certainly follow that firms in a free market would have the freedom to attempt to monopolize (control the entire supply of) some raw material, product or service. But whether they would be able to restrict market output for any reasonable period of time is debatable.

First, such attempts (mergers, buying up available supplies of raw materials) can be prohibitively expensive, even unprofitable, and therefore unlikely.

Second, any other existing firm in the economy (or any new firm with access to capital) would be perfectly free to compete with any would-be monopolist, free to innovate, free to improve product, free to increase its own output, and consumers would be free to take advantage of that competition.

Thus, any firm that attempted to monopolize and restrict market output could lose sales and profits to any other business organization that found it profitable to cater to consumers and compete. Any alleged free-market monopoly supplier that attempted to “restrain trade” would create profitable opportunities for competitors and potential competitors, and these profitable opportunities would exist as long as markets are legally open to new suppliers and consumers are legally free to support alternative suppliers. It is not obvious, therefore, that attempting to monopolize actually can restrain trade or misallocate economic resources.

Following the approach above, a free-market monopoly supplier is not theoretically impossible. For example, if a firm were substantially more efficient than all of its competitors and potential competitors, that is, if it were able to produce some product or service at the lowest cost and charge the lowest price to consumers, it could become (temporarily, perhaps) the only supplier in some well-defined market. The firm’s “efficiency” would create a “barrier of entry” of sorts, totally benign of course, since the only competitors “excluded” would be relatively inefficient suppliers. Alternatively, consumers could always “monopolize” all of their choices for a specific product or service on only one company, making that company a momentary monopoly supplier.

But it is difficult to understand what is economically problematic with any of this. Clearly this circumstance is not the devilish monopoly problem envisioned by critics of the free market since low costs, expanded outputs, lower prices, and free consumer choice are the beneficial attributes of an open market process; they clearly enhance, not harm, any reasonable definition of consumer welfare. So a free-market “monopoly” supplier is theoretically possible but not necessarily harmful and would not rationalize any antitrust regulation.