Business and the Way of Its Functioning in the 1800’s

The main industries, steel, mining, sugar, transportation, agriculture, ship-building, wine, etc., were under monop­oly control in all states before the new initiative which came at the beginning of the 20th century. Under conditions approximating pure competition, the price was set in the marketplace. Price tended to be just enough above costs to keep marginal producers in the business. Thus, from the point of view of the price setter, the most important factor was costs. If a producer’s cost floor was below the prevailing market price, the product would be produced and sold. Since the producer in such a market had little discretion over price, the pricing problem was essential whether or not to sell at the market price. The Monopoly steel industry and sugar production was closely connected with the nature of competition and the inability of competitors to introduce new competitive products to the market. While costs and demand conditions circumscribe the price floor and ceiling, competitive conditions helped to determine where within the two extremes the actual price should be set. The reaction of competitors was the crucial consideration imposing practical limitations on pricing alternatives (Slichter 1948).During the 1800s, ‘natural monopolies’ existed in some industries. Steel and textual industries were limited by what their competitors charged. any price differentials from competitors were justified in the minds of customers on the basis of differential utility, that was, perceived value. At the end of the 19th century, cartels played a dominant role in the market, and be seen as a restraint on competition. A cartel is said to exist when two or more independent firms in the same or affiliated fields of economic activity join together for the purpose of exerting control over a market. More specifically, a cartel was a voluntary association of producers of a commodity or product organized for the purpose of coordinated marketing that was aimed at stabilizing orincreasing the members’ profits.