Oligopoly and the Share of Profits

Abstract

This chapter is concerned with the relationship between the degree of monopoly, defined as the mark-up of price on marginal cost, and the distribution of income, setting on one side for the moment issues of realisation, managerialism, worker pressure and international competition. However, since we are interested in demonstrating the extent of capitalist control over the degree of monopoly, and thus over the distribution of income, we will be concerned to isolate those factors which determine the degree of monopoly. We will in fact derive a specific link between different elements of market structure and behaviour — concentration, the degree of collusion and the price elasticity of demand — and the degree of monopoly by assuming profit-maximising behaviour on the part of each member of the oligopoly group. We will then assess the extent to which these elements of market structure are themselves within capitalist control. This will necessitate an examination of the extent to which the degree of monopoly is conditional on potential entry into the market by new rivals. Our analysis will suggest that the price—output decisions of the oligopoly group are essentially independent of potential entry but that the capacity decision may not be.