Ethics in the Marketplace

ETHICS IN THE MARKETPLACEBusiness Ethics-School of Management-Andalas University

ETHICS IN THE MARKETPLACE

Competition is part of the free enterprise system. Competition tends to produce efficiency in the market and benefits the general consumer by resulting in a variety of goods at the best prices. We shall examine just a few of the areas where the temptations to act immorally are significant, and where some practices are morally questionable.

Definition of MarketA forum in which people come together to exchange ownership of goods; a place where goods or services are bought and sold.

Models of Market Competition

Ethical Weaknesses of MonopoliesViolates capitalist justice. charging more for products than producer knows they are worth Violates utilitarianism. keeping resources out of monopoly market and diverting them to markets without such shortages removing incentives to use resources efficiently Violates negative rights. forcing other companies to stay out of the market letting monopolist force buyers to purchase goods they do not want letting monopolist make price and quantity decisions that consumer is forced to accept

Unethical Practices inOligopolistic MarketsPrice-fixing Manipulation of supply Market allocation Bid rigging Exclusive dealing arrangements Tying arrangements Retail price maintenance agreements Predatory price discrimination.

The Fraud TriangleThe pressures or strong incentives to do wrong, such as organizational pressure, peer pressure, company needs, personal incentives The opportunity to do wrong, which includes the ability to carry out the wrongdoing, being presented with circumstances that allow it, low risk of detection The ability to rationalize ones action by framing it as morally justified.

Main Views on Oligopoly Power Do-nothing view. Do nothing since power of oligopolies is limited by competition between industries and by countervailing power of large groups Antitrust view. Large monopoly and oligopoly firms are anticompetitive and should be broken up into small companies Regulation view. Big companies are beneficial but need to be restrained by government regulation.