Read this chapter to learn the characteristics, workings, and effects of the monopoly model. Take a moment to read through the stated learning outcomes for this chapter of the text, which you can find at the beginning of each section. These outcomes should be your goals as you read through the chapter. Attempt the "Try It" problems at the end of each section before checking your answers.
Matty Moroun was quietly enjoying his monopoly power. He is the owner of the 80-year-old Ambassador Bridge, a suspension bridge that is the only connection between Detroit, Michigan, and Windsor, Ontario. He purchased the bridge from Warren Buffet in 1974 for $30 million. Forbes estimates that it is now worth more than $500 million. Mr. Moroun oversees the artery over which $100 billion of goods - one-quarter of U.S. trade with Canada and 40% of all truck shipments from the United States - make their way between the two countries.
Despite complaints of high and rising tolls - he has more than doubled fares for cars and tripled fares for trucks - Mr. Moroun has so far held on. Kenneth Davies, a lawyer who often battles Mr. Moroun in court, is a grudging admirer. "He's very intelligent and very aggressive. His avarice and greed are just American capitalism at work," he told Forbes.
What are the sources of his monopoly power? With the closest alternative bridge across the Detroit River two hours away, location is a big plus. In addition, the cost of creating a new transportation link is high. A group that is considering converting an old train tunnel to truck use and boring a new train tunnel some distance away is facing a $600 million price tag for the project. In addition to having entry by potential competitors blocked, he has a status not shared by most other monopolists. The Michigan Supreme Court ruled in 2008 that the city of Detroit cannot regulate his business because of the bridge's international nature. Canadian courts have barred any effort by Canadian authorities to regulate him. He will not even allow inspectors from the government of the United States to set foot on his bridge.
Increased security since 9/11 has caused delays, but Mr. Moroun has eased these by increasing his own spending on security to $50,000 a week and by building additional inspection stations and gifting them to the U.S. inspection agency, the General Services Administration. Even a monopolist understands the importance of keeping his customers content! Mr. Maroun has even proposed building a new bridge just next to the existing bridge.
Because of the terrorist attacks on 9/11 and the concern about vulnerability and security, calls to deal with this monopoly have increased. Some people argue that the government should buy what is the most important single international arterial in North America, while others have called for more regulatory oversight. The Canadian and Michigan governments have been discussing the possibility of building a publicly funded bridge nearby. Time will tell whether Mr. Moroun can hold onto what Forbes writers Stephane Fitch and Joann Muller dubbed "the best monopoly you never heard of".