Date

Spring 2018

Document Type

Honors Project

Department

Economics

First Advisor

Dr. Robison

Abstract

This paper takes a case study approach to studying the efficiency and causes of decline for monopoly firms. The focus of the analysis will be on two firms: IBM, and Xerox. The main causes of failure studied will be financial issues, mismanagement, and regulatory cases. One theory is that, as monopolies operate, one begins to see a differential between growth of profits and expenditures. Thus, the firms become “fat and slow.” The company may also become bogged down with overhead, attempting to maintain unsustainable and unnecessary levels of employment. Compounding this issue, many managers fail to accurately predict the movement of the industry, causing firms to fall behind their competitors and become obsolete. Additionally, anti-trust laws often curtail what actions can be taken by the firm, regarding mergers and patents, as well as making companies wary of making strategic moves that may attract the attention of regulators. It is possible that any of these factors may be the root source of the x-inefficiency observed in monopolies.

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