Why does the word “monopoly” result in such aversion in an average person? Is it because monopolies are “bad”? Surely monopolies only exist to make as much money as possible, right? Think of some of the examples of monopolies (or near monopolies) in our history: AT&T, Standard Oil, US Steel, your local energy company, De Beers, MLB, NFL, etc. Even oligopolies invite collusive agreements.
Yet, being a monopoly doesn't mean that they are always profitable. The real reason that monopolies are so “bad”, most economists argue, is that monopolies reduce consumer surplus and, therefore, overall economic welfare.
So what do we do about it? Our answer to everything in the United States is to regulate ourselves to death. We pass antitrust regulations. We increase corporate tax to penalize these companies for making lots of money.
Except that increasing taxes and regulation decreases economic output and chases corporations away from states or even countries. Some people have gone too far and have used regulations to limit competition, interfering with potentially good mergers. Think of some possible mergers that could have resulted in a positive economic benefit (especially consider vertical mergers): United Airlines & US Air, Staples & Office Depot, and GE & Honeywell.
Regulation doesn't always lead to the death of monopolies, though. In fact, many monopolies (or near monopolies) are supported by government regulation. Think about the government’s support for agricultural prices, public utilities, or the post office.
So what is the alternative to monopolies? How do we prevent them from occurring? How do we control them? Do we have to? Should we just force public ownership on these companies if they don’t guarantee perfect competition or something like it?