Competitive prices, it is frequently assumed, will in the long run be fixed mainly by the cost of production of that part of the stock which is produced at the greatest disadvantage. Monopoly price, on the other hand, is fixed at that point which will secure to the monopolist the greatest net return. If greater return will be secured by lowering the price and increasing the sales, the price will be lowered. 

If the net returns will be greater by increasing the price, even though the number of sales be lessened, that policy will be adopted. In technical discussions regarding prices, the assumption is usually made of either a regime of free competition, or of what is substantially monopoly. In a practical discussion of the effects of Trusts upon prices, we must recognize that there may be certain monopolistic powers which may enable prices to be raised somewhat above the competitive rate, but which are still not sufficient to enable the Trust to fix prices entirely regardless of a potential competition. So, also, this monopolistic power may vary in degree in different industries or in the same industry at different times.

If the economics of industrial combination spoken of before are great, it is evident that without lessening profits prices of the finished product might be placed somewhat lower than those under the competitive regime, or prices of the raw materials used might be raised above those prevailing under the competitive regime without lessening profits. We see, therefore, that it is within the power of the managers of the Trusts, provided the Trust has been carefully organized in an industry adapted for combination to put prices below the competitive rates in order to drive out competitors, and then if they have secured monopolistic power thereby, to put prices, within certain limits at any rate, above competitive rates.

Whatever may be the theoretic possibilities, however, under the Trust system, it is essential to note what has in fact been the result, inasmuch as, in addition to the technical economic powers that have been suggested, the psychological factors of public opinion, of demands of laborers, of the boldness of the managers, etc., may all enter into the problem as factors in price determination. Although the Trusts have been in existence for a considerable length of time, it is still as yet altogether too early to determine what the ultimate effect of the Trust upon prices is to be. At the present time, however, there are many instances to show that in individual cases, for short periods of time at any rate, the Trusts have actually lowered prices below the former competitive rates.

Likewise numerous instances can be found of prices raised by the Trusts above former competitive rates. The surest way to test the effect of the combination upon prices is to determine the margin of difference between the cost of leading raw materials used and of the finished products. If an industry is simple in its nature, so that the raw material forms a large part of the value of the finished product, this test can be made with comparative ease, as, for example, in the case of sugar refining, oil refining, the manufacture of alcohol, etc. Several industries were subjected to this test by the Industrial Commission, with the general result that up to date the influence of the Trust had apparently been to raise the margin between the price of the raw material and that of the finished product somewhat above that obtained under the competitive system.

This is a result which seems to establish beyond all doubt the fact that unless the cost of manufacture had been increased--a supposition clearly contrary to the fact as claimed by the Trust people themselves--their profits must have been materially increased; and that the Trust had in reality raised prices to consumers, even though the actual price of the finished product may over a series of years have fallen. On the other hand, in certain instances, it was shown that although this had been the early experience and the first result, showing clearly a decided monopolistic power on the part of the combination, this margin had later been lessened, apparently under the pressure of potential, if not of actual competition. 

It is a fair assumption to make that for the time being at any rate, if the Trust secures considerable monopolistic power, it will place prices somewhat above the competitive rates, although in certain instances it may possibly be true that the saving in the cost of production will enable the combination to keep prices as low as would be possible under the competitive system, while still increasing its profits. On the other hand, it is also safe to conclude that where the chief source of monopolistic power is merely that which is derived from great capital or from a minor association with some natural monopoly, either actual competition will eventually set in or a potential competition will appear so threatening that prices in the long run will be maintained at only a little above--possibly not even at all above--competitive rates.