Monopolies Can't Survive Forever: An Evolutionary-Institutional and Behavioural Perspective on the Non-Permanence of Market Power

15 Pages Posted: 12 Mar 2018

Date Written: March 9, 2018

Abstract

This paper makes use of evolutionary, institutional and behavioural economics to develop a theory of the non-survival of dominant socioeconomic organisations with market power – the failure of monopolies. Using New Institutional Economics we demonstrate the necessity of hierarchy in massive organisations, and using behavioural economics we demonstrate the increasing resistance to change at nexus of power thus generated. Using institutional and evolutionary economics we demonstrate that this creates a trade-off between organisational scale and vulnerability to failure which outside of a special case (the nexus of power being occupied by an antifragile personality) implies that market power can never be permanent. We derive testable implications which align well with existing data and consider the implications our theory has for managerial science and anti-trust law.

Keywords: Hierarchies, adaptability, vulnerability, survival, market power, evolution

JEL Classification: D21, D23, D42, D43, D91, L160

Suggested Citation

Markey‐Towler, Brendan, Monopolies Can't Survive Forever: An Evolutionary-Institutional and Behavioural Perspective on the Non-Permanence of Market Power (March 9, 2018). Available at SSRN: https://ssrn.com/abstract=3136689 or http://dx.doi.org/10.2139/ssrn.3136689

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