Monopoly: Difference between revisions

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==How it works==

;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.

===Characteristics of a monopoly===

*Single producer/~~seller~~

*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>

*No close substitutes

*No close substitutes or comparable product for consumers.

*High barriers to entry

*High barriers to entry prevent competitors from entering the market.

*Price maker ability

*Price maker ability allows monopolist to set market prices.

*Downward-sloping demand curve

*Downward-sloping demand curve, monopolist face the entire market demand curve.

===Monopoly process===

~~Operate differently~~ from competitive markets:

:Monopoly operations differ from competitive markets in key ways:

====Profit maximization ~~mechanism~~====

~~Monopolists maximize profits~~ by ~~producing at~~ the ~~quantity where marginal revenue equals marginal cost (MR=MC)~~.

====Profit maximization====

Maximization process:

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

*~~Determining the output level where~~ MR~~=MC~~

*Setting the price according to what consumers are willing to pay for that quantity

::Maximization process:

*Earning economic profits in the long run due to barriers preventing competitor entry

::*Adjusting production so marginal costs equals marginal revenue.(MC = MR)

::*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====

*First-degree: Charging each customer their maximum willingness to pay.

:Charging different prices to different customers for the same product:

*Second-degree: Pricing varies by quantity purchased.

:*First-degree: Charging each customer their maximum willingness to pay.

*Third-degree: Segmenting markets based on characteristics like age, location, or time of purchase

:*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:

:*Legal barriers: Patents, copyrights, and government licenses.

*Control of ~~essential~~ resources:

:*Control of material resources: Owning key inputs such as mines, transport, etc.

*Economics of scale:

:*Economics of scale: Large fixed costs make single-firm production most efficient, such as utility companies.

*Network effects:

:*Network effects: Value increases with more users.

*Deliberate exclusionary practices:

:*Deliberate exclusionary practices: Predatory pricing or exclusive contracts.

==Why it is a problem==

~~{{Placeholder box|If the theme or common term is positive for the consumer this section can be omitted.~~

Economists identify several significant problems with monopoly power:

===~~Point 1~~===

===Higher prices and reduced output===

Monopolists typically charge higher prices and produce less output than would occur in competitive markets.

===~~Point 2~~===

===Deadweight welfare loss===

~~}}A monopolistic market is often harmful~~ to ~~consumers~~. ~~A monopoly inherently does~~ not ~~have competition, since there is no other party~~ to ~~compete~~. ~~The monopoly can therefore fix prices as they wish~~, ~~with no one~~ to ~~compete~~ for ~~lower prices~~. ~~This often leads to ridiculously high prices and is harmful to consumers~~.

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.

*innovate or improve product quality.

*Operate at minimum efficient scale.

===Potential for abuse of power===

*Paying suppliers less.

*Lowering wages for workers.

*Influencing political processes through lobbying.

==Examples==

~~{{Placeholder box|Some examples of {{PAGENAME}} include:~~

*

*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>

*

*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>

*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>

[[Ticketmaster Entertainment, LLC|Ticketmaster]] is often referred to as a monopoly of live events.

*[[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.

*[[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 monoploly.

==References==

[[Category:Common terms]]

@@ Line 6: / Line 6: @@
 ==How it works==
 {{Placeholder box|How the practice works.}}
+;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.
 ===Characteristics of a monopoly===
-*Single producer/seller
+*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>
-*No close substitutes
+*No close substitutes or comparable product for consumers.
-*High barriers to entry
+*High barriers to entry prevent competitors from entering the market.
-*Price maker ability
+*Price maker ability allows monopolist to set market prices.
-*Downward-sloping demand curve
+*Downward-sloping demand curve, monopolist face the entire market demand curve.
 ===Monopoly process===
-Operate differently from competitive markets:
+:Monopoly operations differ from competitive markets in key ways:
-====Profit maximization mechanism====
-Monopolists maximize profits by producing at the quantity where marginal revenue equals marginal cost (MR=MC).
+====Profit maximization====
-Maximization process:
+:Primary objective is to increase the wealth of the owner or the shareholders of the firm by increasing the net profits.
-*Determining the output level where MR=MC
-*Setting the price according to what consumers are willing to pay for that quantity
+::Maximization process:
-*Earning economic profits in the long run due to barriers preventing competitor entry
+::*Adjusting production so marginal costs equals marginal revenue.(MC = MR)
+::*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====
-*First-degree: Charging each customer their maximum willingness to pay.
+:Charging different prices to different customers for the same product:
-*Second-degree: Pricing varies by quantity purchased.
+:*First-degree: Charging each customer their maximum willingness to pay.
-*Third-degree: Segmenting markets based on characteristics like age, location, or time of purchase
+:*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:
+:*Legal barriers: Patents, copyrights, and government licenses.
-*Control of essential resources:
+:*Control of material resources: Owning key inputs such as mines, transport, etc.
-*Economics of scale:
+:*Economics of scale: Large fixed costs make single-firm production most efficient, such as utility companies.
-*Network effects:
+:*Network effects: Value increases with more users.
-*Deliberate exclusionary practices:
+:*Deliberate exclusionary practices: Predatory pricing or exclusive contracts.
 ==Why it is a problem==
-{{Placeholder box|If the theme or common term is positive for the consumer this section can be omitted.
+Economists identify several significant problems with monopoly power:
-===Point 1===
+===Higher prices and reduced output===
+Monopolists typically charge higher prices and produce less output than would occur in competitive markets.
-===Point 2===
+===Deadweight welfare loss===
-}}A monopolistic market is often harmful to consumers. A monopoly inherently does not have competition, since there is no other party to compete. The monopoly can therefore fix prices as they wish, with no one to compete for lower prices. This often leads to ridiculously high prices and is harmful to consumers.
+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.
+*innovate or improve product quality.
+*Operate at minimum efficient scale.
+===Potential for abuse of power===
+*Paying suppliers less.
+*Lowering wages for workers.
+*Influencing political processes through lobbying.
 ==Examples==
-{{Placeholder box|Some examples of {{PAGENAME}} include:
-*
+*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>
-*
+*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>
+*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>
-[[Ticketmaster Entertainment, LLC|Ticketmaster]] is often referred to as a monopoly of live events.
+*[[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.
+*[[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 monoploly.
 ==References==
 {{reflist}}
 [[Category:Common terms]]