Competition in economics is rivalry in supplying or acquiring an economic service or good. Sellers compete with other sellers, and buyers with other buyers. In its perfect form, there is competition among many small buyers and sellers, none of whom is too large to affect the market as a whole; in practice, competition is often reduced by a great variety of limitations, including monopolies. The monopoly, a limit on competition, is an example of market failure. Competition among merchants in foreign trade was common in ancient times, and it has been a characteristic of mercantile and industrial expansion since the Middle Ages. By the 19th century, classical economic theorists had come to regard competition, at least within the national state, as a natural outgrowth of the operation of supply and demand within a free market economy. The price of an item was seen as ultimately fixed by the confluence of these two forces. Early capitalist economists argued that supply-and-demand pricing worked better without any regulation or control. Their model of perfect competition was marked by absolute freedom of trade, widespread knowledge of market conditions, easy access of buyers to sellers, and the absence of all action restraining trade by agencies of the state. Under such conditions no single buyer or seller could materially affect the market price of an item. After about 1850, practical limitations to competition became evident as industrial and commercial combinations and trade unions arose to limit it. A major theme in the history of competition has been the monopoly, which represents a business interest so large that it has the ability to control prices in a given industry. Some governments attempted to impose competition through legislation, as the United States did in the Sherman Antitrust Act of 1890, which made many monopolistic practices illegal. Other governments depend on monopolistic organizations to boost their economy like the zaibatsu and keiretsu in Japan.The United States Monopolies in the United States have a long history. They usually are associated with industry and the post-Civil War period, but their history originates in Elizabethan England. By the time the American colonies had become independent, the term “monopoly” was already well established. Yet nothing was written about monopolies in the Constitution or in any writing of the founding fathers.
However, several states felt strongly enough about them to prohibit them in their constitutions in the months following independence. For example, the Maryland State Constitution in 1776 stated that “Monopolies are odious, contrary to the spirit of free government… and ought not to be suffered”.
With the support of President Benjamin Harrison, Congress passed the Sherman Antitrust Act in 1890. John Sherman, a lawyer and senator from Ohio, was the author of this legislation that attempted to curb the growth of monopolies. The act...