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Coercive monopoly
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==Government monopolies== Undisputed examples of coercive monopolies are those that are enforced by law. In a [[government monopoly]], an agency under the direct authority of the government itself holds the monopoly, and the coercive monopoly status is sustained by the enforcement of laws or regulations that ban competition, or reserve exclusive control over [[factors of production]] for the government. The state-owned [[petroleum]] companies that are common in oil-rich developing countries (such as [[Aramco]] in [[Saudi Arabia]] or [[PDVSA]] in [[Venezuela]]) are examples of government monopolies created through [[nationalization]] of resources and existing firms. The [[United States Postal Service]] is an example of a coercive monopoly created through laws that ban potential competitors such as [[United Parcel Service|UPS]] or [[FedEx]] from offering competing services (in this case, first-class and standard (formerly called "third-class") mail delivery).{{refn|group=note|[[Lysander Spooner]] started the commercially successful [[American Letter Mail Company]] in order to compete with the United States Post Office by providing lower rates. He was successfully challenged by the U.S. government and exhausted his resources trying to defend his right to compete.}} Government monopolies also mandate taxpayers to subsidize these firms. Thus, if the government protection the United States Postal Service was lifted and mail delivery could be included in free competition, the number of entrants into the industry would likely increase.<ref>{{cite journal |id={{ProQuest|815978228}} |last1=Simpson |first1=Brian P.|title=Two Theories of Monopoly and Competition: Implications and Applications |journal=The Journal of Applied Business and Economics |volume=11 |issue=2 |date=August 2010 |pages=139β151}}</ref> [[Government-granted monopoly|Government-granted monopolies]] often closely resemble government monopolies in many respects, but the two are distinguished by the decision-making structure of the monopolist. In a government monopoly, the holder of the monopoly is the government itself and the group of people who make business decisions is an agency under the government's direct authority. In a government-granted monopoly, the coercive monopoly is enforced through law, but the holder of the monopoly is formally a private [[corporation|firm]], or a subsidiary division of a private firm, which makes its own business decisions. Examples of [[government-granted monopolies]] include [[cable television]] and [[water]] providers in many municipalities in the United States, exclusive petroleum exploration grants to companies such as [[Standard Oil]] in many countries, and historically, lucrative colonial "joint stock" companies such as the [[Dutch East India Company]], which were granted exclusive trading privileges with colonial possessions under [[mercantilist]] economic policy. [[Intellectual property]] such as copyrights and patents are government-granted monopolies. Another example is the thirty-year government-granted monopoly that was granted to [[Robert Fulton]] by the State of New York in steamboat traffic, but was later ruled by the [[United States Supreme Court]] to be unconstitutional because of a conflicting inter-state grant to Thomas Gibbons by the federal Congress.{{refn|group=note|For about six months, Thomas Gibbons and [[Cornelius Vanderbilt]] operated a steamboat with low fares in defiance of the New York law. Gibbons successfully took his case to the [[United States Supreme Court]]. The Court ruled in ''[[Gibbons v. Ogden]]'' that the state-granted monopoly, which conducted some service between New York and New Jersey, was an unconstitutional violation of interstate commerce. Fares immediately dropped from $7 to $3.<ref>{{cite book| last=Folsom |first=Burton W. Jr. |author-link=Burton W. Folsom Jr. |date=2003 |title=The Myth of the Robber Barons |url=https://archive.org/details/mythofrobberbaro00fols/page/2/mode/2up |location=Herndon, Virginia |publisher=Young America's Foundation |page=2 |isbn=0-9630203-0-7}}</ref>}} Economist [[Lawrence Reed]] says that a government can cause a coercive monopoly without explicitly banning competition by "simply [bestowing] privileges, immunities, or subsidies on one firm while imposing costly requirements on all others."<ref>{{cite news |last=Reed |first=Lawrence W. |author-link=Lawrence Reed |title=Witch-hunting For Robber Barons: The Standard Oil Story |url=https://fee.org/articles/witch-hunting-for-robber-barons-the-standard-oil-story/ |work=[[Foundation for Economic Education]] |date=March 1, 1980}}</ref> For example, [[Alan Greenspan]], in his essay ''Antitrust'', argues that land subsidies to railroad companies in the western portion of the U.S. in 19th century created a coercive monopoly position. He says that "with the aid of the federal government, a segment of the railroad industry was able to 'break free' from the competitive bounds which had prevailed in the East."{{Citation needed|date=March 2022}} In addition, regulations may be established that place financial burdens on smaller firms that attempt to compete with larger, more established firms that are better able to absorb the regulatory costs.
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