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Hastings Communications and Entertainment Law Journal

Abstract

American Courts have pronounced that monopolies cannot have goodwill or that a monopoly's goodwill is of no value, because the monopolist's customers have no choice but to patronize the monopoly firm. This Article argues that this proposition does not withstand theoretical scrutiny. Application of basic economic principles establishes that the value of goodwill to a firm is directly related to the elasticity of demand for that firm's goods or services, but the monopoly power is insufficient, alone, to measure the elasticity of demand. The author also argues that the value of goodwill to a monopolist is also closely correlated with the ease of potential entry into the market, for a monoplist's goodwill can be a barrier to entry. This issue has, in recent years, evolved as one of particular interest to the cable television industry. Popularly viewed as an industry of small, regional monopolies, there is no question that cable television companies do exercise at least some monopolistic power. Because so many of the assets of a cable television firm are intangible and because, in so many areas of law and regulation, the size and nature of a firm's assets are important, the allocation of cable television firms' assets to goodwill, if such can exist, has significant consequences.

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