Market Structure and Management of Technological Monopolies

Purpose: This article provides several criteria for setting a balanced approach between the legitimate strategy of growth of technological incumbents, and the preservation of market contestability. We take for granted the predominant role of big monopolists, wielding an overwhelming advantage in terms of economies of scale and technological dominance. To such extent, the microeconomic theory recognizes the existence of natural monopolies. However, the antitrust doctrine assesses the actions of incumbents in order to avoid abusive behavior, to preserve the market contestability, and to defend the rights of consumers. Using several case analysis and up-to-date theoretical contributions, we apply the recent principles of the theory of industrial organization in the interpretation of strategic moves of incumbents and rivals whose interests is reinforcing their market position. Design/Methodology/Approach: We adopt a comparative approach, alternating theoretical principles and case analysis. Results overhaul some basic inspiring concepts that guide the analysis of the behavior of incumbents amid markets strongly monopolized, and finally discuss a few specific cases evaluating the criteria of the antitrust doctrine. In the traditional antitrust stance, the main concern had been to preserve competitive prices and safeguard against any harmful market concentration. However, in some two-sided markets typically the prices tend to be unusually low, leading the antitrust doctrine to new paradigms guided by updated tenets. We proceed to confront the principles provided by the theory, and we interpret several cases of incumbent behavior, in order to assess the degree of market concentration, and if the incumbent behavior jeopardized the market contestability. Findings: Results overhaul some basic inspiring concepts that guide the analysis of the behavior of incumbents amid markets strongly monopolized, and finally discuss a few specific cases evaluating the criteria of the antitrust doctrine. In the traditional antitrust stance, the main concern had been to preserve competitive prices and safeguard against any harmful market concentration. However, in some two-sided markets typically the prices tend to be unusually low, leading the antitrust doctrine to new paradigms guided by updated tenets. As theorists point out, the best criteria for itnterpreting the behaviour of incumbents is the rule of reason, gathering the most complete information and analizing the specific segment, and the particular market conditions. Practical Implications: Based on a microeconomic bedrock we highlight the challenges faced by the enforcers on charge of the antitrust policy. Based on our discussion, some criteria can be drawn from the recent trends in the economic theory. The conclusions we propose, can illuminate the enforcer´s approach in order to recognize true abusive behavior by the incumbents, and distinguish legitimate strategies for increasing the corporative efficiency of incumbents. Originality/Value: Our discussion becomes breaking and strongly demanded by the scientific community and by enforcers of antitrust doctrine. The theory of industrial organization has achieved relevant frameworks for interpreting the role of dominant technological companies. The key contribution is to build a coherent framework balancing the fair economic growth and the preservation of the market contestability. Our work is relevant and interesting to the extent that, in the current market development, the quick technological advances give rise to cutting-edge dominant companies operating as monopolists. We propose some criteria to deal with the concentrated markets whose regulation requires the fair enforcement of competition authorities.