Monopoly: Difference between revisions

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===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>

*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>

*High barriers to entry

'''High barriers to entry'''

::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.

*Price discrimination strategies

*'''Price discrimination strategies'''

:*First-degree

:::Charging each customer their maximum willingness to pay.

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===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==

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*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:

: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. ~~After 50 year long reign over the diamond market, it~~ began to lose its control in the 1950s when new mines were discovered in other parts of the world. ~~The company is~~ responsible for 30% of diamond sales globally~~. The company has also~~ been accused of limiting the supply of diamonds to manipulate its prices~~. 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>

: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]].

*Luxottica.

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*[[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 ~~Curwen~~

*[[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>

|first=Jason 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= }}</ref>

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

*Tyson Foods.

@@ Line 26: / Line 26: @@
 ===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>
-*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>
-*High barriers to entry
+'''High barriers to entry'''
 ::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.
-*Price discrimination strategies
+*'''Price discrimination strategies'''
 :*First-degree
 :::Charging each customer their maximum willingness to pay.
@@ Line 68: / Line 70: @@
 ===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==
@@ Line 95: / Line 94: @@
 *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:
-: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. After 50 year long reign over the diamond market, it began to lose its control in the 1950s when new mines were discovered in other parts of the world. The company is responsible for 30% of diamond sales globally. The company has also been accused of limiting the supply of diamonds to manipulate its prices. 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>
+: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]].
 *Luxottica.
@@ Line 101: / Line 100: @@
 *[[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 Curwen
+*[[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>
-|first=Jason 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= }}</ref>
 *[[Ticketmaster Entertainment, LLC|Ticketmaster]] is often referred to as a monopoly of live events.
 *Tyson Foods.