Wal-Mart a Monopoly? A Monopoly Research Proposal

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Wal-Mart is a price maker, as any monopoly would be. The company is famous for dictating prices to its suppliers. However, with regards to buyers, Wal-Mart is not a price maker. It is reasonable to assume that the company can raise some prices somewhat without losing market share; it is not true that they can raise all prices near indefinitely without losing market share. Wal-Mart has a captive audience, so they could raise their prices without significantly compromising their business, but other competitors would be able to exploit those increases and customers would be able to take their business elsewhere.

The demand curve for a true monopoly is negatively sloped, as is Wal-Marts, but Wal-Mart would lose all of its customers if it raised its price high enough, whereas a true monopoly would not. Indeed, a true monopoly seeks to maximize profit by finding the position on the demand curve where incremental increases in profit meet incremental decreases in demand from the higher price. Wal-Mart seeks to sell at the lowest price. This may not correspond with that position on the demand curve. They do this because it fits with their overall business strategy.

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Additionally, Wal-Mart does not take advantage of opportunities for price discrimination, as a monopoly typically would.

Another difference between Wal-Mart and a monopoly is that monopolies tend to be inefficient. This is because they have no competitive threat. Wal-Mart, however, is driven by competitive threat. That sense of being under threat is part of the corporate culture (Schendler, 2005). In response to this, Wal-Mart is lean and has exceptional knowledge of their suppliers' businesses. Wal-Mart is closer to perfect competition in their use of efficiency and information than they are to monopoly.

Wal-Mart is not a monopoly. It does not behave like a monopoly. It behaves like a firm in a highly competitive industry that seeks to have a dominant market share. The company leverages information, competitive advantage and economies of scale to build their market share. They face stiff competition from a wide range of competitors in almost all segments of their business. Weighed against the definition of a monopoly and the behavior of a monopoly with respect to price taking and price making, Wal-Mart shows none of the characteristics of a true monopoly.

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