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


;Types of monopolies
===Types of monopolies===
;Pure monopoly
;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.
:One company has complete control over a product's supply, with no similar alternatives and significant obstacles for others to enter the market.
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===Key characteristics===
===Key characteristics===
*;'''Single producer'''
 
'''Single producer'''
::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>
::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>
*;'''No close substitutes'''
'''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>
::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>
*;'''High barriers to entry'''
'''High barriers to entry'''
::Significant obstacles prevent competitors from entering the market.
::Significant obstacles prevent competitors from entering the market.
:*;'''Legal barriers'''
::*Legal barriers
:::Patents, copyrights, government licenses.
::::Patents, copyrights, government licenses.
:*;'''Control of essential resources:'''
::*Control of essential resources
:::Owning key manufacturing processes or mining operations
::::Owning key manufacturing processes or mining operations
:*;'''Economies of scale:'''
::*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>
::::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:'''
::*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>
::::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:'''
::*Deliberate exclusionary practices:
:::Predatory pricing or exclusive contracts.
::::Predatory pricing or exclusive contracts.
*;'''Price maker ability'''
 
::The monopolist can set prices rather than accept market prices.
===Price maker ability===
*;'''Downward-sloping demand curve'''
:The monopolist can set prices rather than accept market prices.
*'''Downward-sloping demand curve'''
::Unlike competitive firms, monopolists face the entire market demand curve.
::Unlike competitive firms, monopolists face the entire market demand curve.
*;'''Price discrimination strategies'''
*'''Price discrimination strategies'''
:*;First-degree
:*First-degree
:::Charging each customer their maximum willingness to pay.
:::Charging each customer their maximum willingness to pay.
:*;Second-degree
:*Second-degree
:::Pricing varies by quantity purchased.
:::Pricing varies by quantity purchased.
:*;Third-degree
:*Third-degree
:::Segmenting markets based on characteristics like age, location, or time of purchase.
:::Segmenting markets based on characteristics like age, location, or time of purchase.


===Monopoly process===
===Monopoly process===
:Monopoly operations differ from competitive markets in key ways:


====Profit maximization====
;Profit maximization
:Primary objective is to increase the wealth of the owner or the shareholders of the firm by increasing the net profits.
:Primary objective is to increase the wealth of the owner or the shareholders of the firm by increasing the net profits.


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::*Setting the price according to what consumers are willing to pay for that quantity.
::*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.
::*Earning economic profits in the long run due to barriers preventing competitor entry.
====Price Discrimination Strategies====
:Charging different prices to different customers for the same product:
:*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.
====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===
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.
 
===Productive inefficiency===
Without pressure, monopolies may lack incentives to:


*Minimize costs.
*'''Deadweight welfare loss'''
*innovate or improve product quality.
:*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.
*Operate at minimum efficient scale.
:*Reduced consumer surplus
:*Convert consumer surplus (the difference between what consumers are willing to pay and what they actually pay) into producer profits.


===Potential for abuse of power===
*'''Productive inefficiency'''
:Without pressure from competitors, monopolies may lack incentives to:
:*Minimize costs.
:*innovate or improve product quality.
:*Operate at minimum efficient scale.


*Paying suppliers less.
*'''Potential for abuse of power'''
*Lowering wages for workers.
:*Paying suppliers less.
*Influencing political processes through lobbying.
:*Lowering wages for workers.
:*Influencing political processes through lobbying.


==Examples==
==Examples==
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*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>
*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>
*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>
*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 had 90% market share in 1980 and 29% as of 2022.<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>
*De Beers Group:
: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>
*[[Google]].
*[[Google]].
*Luxottica.
*Luxottica.
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*[[Nvidia]] uses its market leader position to mislead consumers and threaten media.
*[[Nvidia]] uses its market leader position to mislead consumers and threaten media.
*Standard Oil (1900).
*Standard Oil (1900).
*[[AT&T|The American Telephone and Telegraph Company]] (AT&T) controlled telecommunications in America until 1982.
*[[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.
*[[Ticketmaster Entertainment, LLC|Ticketmaster]] is often referred to as a monopoly of live events.
*Tyson Foods.
*Tyson Foods.
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