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Corporate Strategy and Policy
Member rating: No Rating | Words: | Submitted: Tue Jun 20 2006
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Corporate Strategy and Policy Note on the failure of established firms Business historians have often pointed out that established firms have a tendency to last long, very long. A look at the list of the largest 10 companies in the US in 1920 and in 1970 would reveal seventy percent common names. This is what the economists call "the persistence of monopoly". To some it suggests major departure from the ideal of competition that is supposed to drive down "abnormal profits" in the long run. To others it indicates large welfare cost requiring antitrust intervention. In 1982 Gilbert and Newbury (1982) published a now classic paper in the American Economic Review in which they showed, under quite general conditions, that a firm having a patent giving it a monopoly right for a limited period of time will always have greater incentive than anybody else to extend its monopoly by obtaining the...
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