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{{Placeholder box|How the practice works.}}
{{Placeholder box|How the practice works.}}


=== Types of monopolies ===
===Types of monopolies===
;Pure monopoly
:One company has complete control over a product's supply, with no similar alternatives and significant obstacles for others to enter the market.
;Natural monopoly
:One company can deliver a product or service more effectively than several companies could.
;Public monopoly
:Government-controlled organizations that provide necessary services, such as water and electricity.
;Monopoly by merger
:Gaining market control from acquisitions and mergers.
;Technological monopoly
:Exclusive patent rights on a product or process preventing competition.
;Geographic monopoly
:A single company dominates a specific geographic area.
;Government monopoly
:State controlled companies.
;Monopolistic competition
:This market structure includes many sellers who offer different products and have some level of market influence.


* Pure Monopoly: One company has complete control over a product's supply, with no similar alternatives and significant obstacles for others to enter the market.
===Key characteristics===
* Natural Monopoly: One company can deliver a product or service more effectively than several companies could.
*Single producer
* Public Monopoly: Government-controlled organizations that provide necessary services, such as water and electricity.
::The market consists of only one company supplying the entire market demand.<ref>{{Cite web |last=Nasrudin |first=Ahmad |date=January 22, 2025 |title=Monopoly: Meaning, Examples, Characteristics, Causes, Advantages, Disadvantages |url=https://penpoin.com/monopoly/ |website=penpoin.com}}</ref><ref>{{Cite web |last=Tiwari |first=Dimple |date= |title=Monopoly Market: Features and Examples |url=https://www.vedantu.com/commerce/monopoly-market |website=vendantu.com}}</ref>
* Monopolistic competition: This market structure includes many sellers who offer different products and have some level of market influence.
*No close substitutes
 
::Consumers have no alternative products that can satisfy the same need.<ref>{{Cite web |date= |title=What is 'Monopoly' |url=https://economictimes.indiatimes.com/definition/monopoly?from=mdr |website=economictimes.indiatimes.com}}</ref>
===Characteristics of a monopoly===
*High barriers to entry
*Single producer or seller supplying the entire market demand.<ref>{{Cite web |last=Nasrudin |first=Ahmad |date=January 22, 2025 |title=Monopoly: Meaning, Examples, Characteristics, Causes, Advantages, Disadvantages |url=https://penpoin.com/monopoly/ |website=penpoin.com}}</ref><ref>{{Cite web |title=Monopoly |url=https://www.law.cornell.edu/wex/monopoly |website=law.cornell.edu}}</ref>
::Significant obstacles prevent competitors from entering the market.
*No close substitutes or comparable product for consumers.
:*Legal barriers
*High barriers to entry prevent competitors from entering the market
:::Patents, copyrights, government licenses.
*Price maker ability allows monopolist to set market prices
:*Control of essential resources
*Downward-sloping demand curve, monopolist face the entire market demand curve
:::Owning key manufacturing processes or mining operations
:*Economies of scale
:::Large fixed costs make single firm production most efficient.<ref>{{Cite web |last=Emerson |first=Patrick |date= |title=Intermediate Microeconomics |url=https://open.oregonstate.education/intermediatemicroeconomics/chapter/module-15/ |website=oregonstate.education}}</ref>
:*Network effects:
:::Value increases with more users.<ref>{{Cite web |date=July 2023 |title=Monopoly |url=https://www.law.cornell.edu/wex/monopoly |website=law.cornell.edu}}</ref>
:*Deliberate exclusionary practices:
:::Predatory pricing or exclusive contracts.
*Price maker ability
::The monopolist can set prices rather than accept market prices.
*Downward-sloping demand curve
::Unlike competitive firms, monopolists face the entire market demand curve.
*Price discrimination strategies
:*First-degree
:::Charging each customer their maximum willingness to pay.
:*Second-degree
:::Pricing varies by quantity purchased.
:*Third-degree
:::Segmenting markets based on characteristics like age, location, or time of purchase.


===Monopoly process===
===Monopoly process===
Operate differently from competitive markets:
====Profit maximization mechanism====
Monopolists maximize profits by producing at the quantity where marginal revenue (MR) equals marginal cost (MC).


Maximization process:
;Profit maximization
*Determining the output level where MR=MC
:Primary objective is to increase the wealth of the owner or the shareholders of the firm by increasing the net profits.
*Setting the price according to what consumers are willing to pay for that quantity
*Earning economic profits in the long run due to barriers preventing competitor entry


====Price Discrimination Strategies====
::Maximization process:
Charging different prices to different customers for the same product:
::*Adjusting production so marginal costs equals marginal revenue.(MC = MR)
*First-degree: Charging each customer their maximum willingness to pay.
::*Setting the price according to what consumers are willing to pay for that quantity.
*Second-degree: Pricing varies by quantity purchased.
::*Earning economic profits in the long run due to barriers preventing competitor entry.
*Third-degree: Segmenting markets based on characteristics like age, location, or time of purchase
 
====Barriers to entry====
*Legal barriers: Patents, copyrights, and government licenses
*Control of material resources: Owning key inputs such as mines, transport, etc.
*Economics of scale: Large fixed costs make single-firm production most efficient, such as utility companies
*Network effects: Value increases with more users
*Deliberate exclusionary practices: Predatory pricing or exclusive contracts


==Why it is a problem==
==Why it is a problem==
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===Higher prices and reduced output===
===Higher prices and reduced output===
Monopolists typically charge higher prices and produce less output than would occur in competitive markets.
:Monopolists typically charge higher prices and produce less output than would occur in competitive markets.


===Deadweight welfare loss===
*'''Deadweight welfare loss'''
Reduce output creates a deadweight loss, a reduction in total economic welfare not transferred to any party. This represents the value that could have been created if not for the monopolies restrictions of output.
:*Reduce output creates a deadweight loss, a reduction in total economic welfare not transferred to any party. This represents the value that could have been created if not for the monopolies restrictions of output.
:*Reduced consumer surplus
:*Convert consumer surplus (the difference between what consumers are willing to pay and what they actually pay) into producer profits.


===Reduced consumer surplus===
*'''Productive inefficiency'''
Convert consumer surplus (the difference between what consumers are willing to pay and what they actually pay) into producer profits
:Without pressure, monopolies may lack incentives to:
:*Minimize costs.
:*innovate or improve product quality.
:*Operate at minimum efficient scale.


===Productive inefficiency===
*'''Potential for abuse of power'''
Without pressure, monopolies may lack incentives to:
:*Paying suppliers less.
:*Lowering wages for workers.
:*Influencing political processes through lobbying.


*Minimize costs.
==Examples==
*innovate or improve product quality
*Operate at minimum efficient scale
 
===Potential for abuse of power===


*Paying suppliers less
*American Tobacco (1890-1907).<ref>{{Cite web |last=Armentano |first=Dominick |date=March 1, 1971 |title=Antitrust History: The American Tobacco Case of 1911 |url=https://fee.org/articles/antitrust-history-the-american-tobacco-case-of-1911/ |website=fee.org}}</ref>
*Lowering wages for workers
*Anheuser-Busch InBev (AB InBev) was created in 2008 from the merger of the two largest beer companies, Anheuser-Busch and InBev. 1.88 billion hectolitres produced globally (one hectoliter equals 100 liters or 26.5 gallons U.S.). AB InBev accounting for 506 million hectoliters, more than double the production of the second largest company, Heineken.<ref>{{Cite web |last=Conway |first=Jan |date=December 11, 2024 |title=Anheuser-Busch InBev (AB InBev) - Statistics & Facts |url=https://www.statista.com/topics/1904/anheuser-busch-inbev-ab-inbev/#topicOverview |website=statista.com}}</ref>
*Influencing political processes through lobbying
*Carnegie Steel Company (1900).<ref>{{Cite web |title=The Founding of U.S. Steel and the Power of Public Opinion |url=https://www.library.hbs.edu/us-steel/exhibition/the-founding-of-u.s.-steel-and-the-power-of-public-opinion |website=Harvard Business School}}</ref>
 
*De Beers Group:
==Examples==
:Established by Cecil Rhodes in 1888.They have faced numerous allegations throughout its history. He purchased the remaining mines and diamonds from other companies, nearly 85% of the diamond market fell into the hands of Da Beers Group. It began to lose its control in the 1950s when new mines were discovered in other parts of the world. They are responsible for 30% of diamond sales globally and have been accused of limiting the supply of diamonds to manipulate its prices.<ref>{{Cite web |last=Jaganmohan |first=Madhumitha |date=June 26, 2025 |title=Market share of the leading diamond mining companies worldwide in 2023 |url=https://www.statista.com/statistics/585450/market-share-of-diamond-supply-worldwide-by-producer/#:~:text=Market%20share%20of%20the%20leading%20diamond%20producers%20worldwide%202023&text=As%20of%202023%2C%20the%20Russian,global%20diamond%20production%20market%20share.|website=Statista}}</ref>
{{Placeholder box|Some examples of {{PAGENAME}} include:
*[[Google]].
*Luxottica.
*[[Microsoft]] [[Windows]]
*[[Nvidia]] uses its market leader position to mislead consumers and threaten media.
*Standard Oil (1900).
*[[AT&T|The American Telephone and Telegraph Company]] (AT&T) controlled telecommunications in America until 1982.<ref>{{Cite web |last=Whalley |first=Jason |last2=Curwen |first2=Peter |date=February 2007 |title=Internationalization and De-internationalization in the Telecommunications Industry |url=https://scholarship.law.umn.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=1235&context=mjlst |website=scholarship.law.umn.edu}}</ref>
*[[Ticketmaster Entertainment, LLC|Ticketmaster]] is often referred to as a monopoly of live events.
*Tyson Foods.
*Yoshida Kogyo KabushikiKaisha (YKK) founded in 1934, currently controls 90% of the zipper market and is rarely accused of being a monopoly.


*
*
*}}
[[Ticketmaster Entertainment, LLC|Ticketmaster]] is often referred to as a monopoly of live events.
==References==
==References==
{{reflist}}
{{reflist}}


[[Category:Common terms]]
[[Category:Common terms]]
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