And a dominant position in one market can be
leveraged into another, connected or derivative, market.
But not everyone agrees. Ellis Hawley believed that industries should
be encouraged to grow because only size guarantees survival, lower
prices, and innovation. Louis Galambos, a business historian at Johns
Hopkins University, published a 1994 paper titled "The Triumph of
Oligopoly". In it, he strove to explain why firms and managers - and
even consumers - prefer oligopolies to both monopolies and completely
free markets with numerous entrants.
Oligopolies, as opposed to monopolies, attract less attention from
trustbusters. Quoted in the Wall Street Journal on March 8, 1999,
Galambos wrote: "Oligopolistic competition proved to be beneficial ...
because it prevented ossification, ensuring that managements would keep
their organizations innovative and efficient over the long run."
In his recently published tome "The Free-Market Innovation Machine -
Analysing the Growth Miracle of Capitalism", William Baumol of
Princeton University, concurs. He daringly argues that productive
innovation is at its most prolific and qualitative in oligopolistic
markets. Because firms in an oligopoly characteristically charge
above-equilibrium (i.
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