Monday 13 November 2017

Is an oligopoly market more desirable than a perfectly competitive market in the future?

I think that in the future an oligopoly market may be more desirable than a perfectly competitive market. This is because of the possible replacement of human labours by machinery and AIs. Many people are afraid that the rapid development of AI may replace labours' jobs, and the unemployment rate could increase dramatically. However, if the economy is dominated by oligopolistic companies, such worry could be mitigated or even disappear.
When an economy is dominated by oligopolistic companies, it means the companies in the economy are able to have some degree of market power, which means they are able to have more control of their revenues and profits. On the other hand, in a perfectly competitive market, companies are the same as consumers that they are all price takers; therefore, companies only have to choose between producing at the lowest possible costs or leaving the markets. Such difference means companies in an oligopolistic market and in a perfectly competitive market have different attitudes when making hiring decisions. Companies in a perfectly competitive market have to hire labours with the lowest costs; however, oligopolistic companies are able to become more flexible when making hiring decisions, so they do not have to hire the cheapest labours or replace labours by cheaper machines or AI. In addition, when an economy is dominated by oligopolistic companies, their employees are also their consumers; therefore, if they do not pay their workers well, their consumptions would become less capable to consume their products, thus reducing their profitabilities, so they would like to balance the labour costs and their consumers' consumption abilities.
Therefore, if an economy is dominated by oligopolistic companies, workers in the economy are likely to receive higher incomes and less likely to be replaced by machines and AIs, as they are also their employers' important consumers.

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