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A [[wikipedia:Monopoly|monopoly]] represents one of the most extreme market structures in economics, characterized by a single seller dominating an entire industry without meaningful competition.
A [[wikipedia:Monopoly|monopoly]] is a market structure where a single firm, the monopolist, is the exclusive supplier of a product or service with no close substitutes. This grants the firm significant control over prices and supply, often leading to reduced consumer choice and potential market inefficiencies. They are often characterized by few characteristics.
==Whatsa monopoly?==
===Monopolistic characteristics===
#Single seller
#*One company dominates the entire market, eliminating competition.<ref name=":01">{{Cite web |title=What is 'Monopoly' |url=https://economictimes.indiatimes.com/definition/monopoly |website=Economic Times of India }}</ref><ref name=":02">{{Cite web |last= |first= |date=July 8, 2024 |title=Monopoly Market – Types, Characteristic and Impact |url=https://herovired.com/learning-hub/blogs/monopoly-market |website= }}</ref>
#Price maker
#*The monopolist sets prices unilaterally, unlike competitive markets where prices are determined by supply and demand.<ref name=":01"></ref><ref name=":02"></ref>
#Barriers to entry
#*Legal, economic, or natural obstacles prevent competitors from entering the market.<ref name=":03">{{Cite web |date= |title=Understanding Monopoly Definitions and Barriers to Entry  |url=https://www.studypug.com/micro-econ-help/monopoly-definitions |website=Study Pug }}</ref>
#Unique product
#*The absence of viable substitutes forces consumers to buy from the monopolies.<ref name=":06"></ref>
#Market power
#*Enables manipulation of supply, prices, and consumer behavior.<ref name=":02"></ref>
{| class="wikitable" style="border-style: solid; border-width: 2px; text-align: center" cellpadding="4px"
|+ Key characteristics of monopolies
|-
! scope="col" style="text-align: left"| Characteristic
! Description
! Implication
|-
! scope="col" style="text-align: left"| Single seller
| Sole provider of a product/service
| No market competition
|-
! scope="col" style="text-align: left"| Price setting
| Ability to set prices above competitive levels
| Higher consumer prices
|-
! scope="col" style="text-align: left"| Barriers to Entry
| Obstacles like patents, high startup costs, or resource control
| Sustained market dominance
|-
! scope="col" style="text-align: left"| No Close Substitutes
| Unique product offering
| Consumer dependency on monopolist
|-
|}


==How it works==
===Types of monopolies===
===Types of monopolies===
;Pure monopoly
Monopolies emerge through distinct mechanisms.
: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
;Natural monopoly
*:Arises when a single firm supplies the entire market at the lowest cost due to economies of scale (e.g., utilities like water or electricity).<ref name=":02"></ref><ref name=":03"></ref><ref name=":04">{{Cite web |date= |title=Legal Monopoly |url=https://corporatefinanceinstitute.com/resources/economics/legal-monopoly/ |website=Corporate Finance Institute }}</ref> Example: Railway networks requiring massive infrastructure investments.
:One company can deliver a product or service more effectively than several companies could.
*Legal or statutory monopoly
;Public monopoly
*:Government-granted exclusive rights via patents, copyrights, licenses, or public franchises. Rationales include ensuring universal access to essential services and incentivizing innovation.<ref name=":01"></ref><ref name=":04"></ref> Example: AT&T’s telephone service monopoly (1907–1982).<ref name=":04"></ref><ref name=":05">{{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>
:Government-controlled organizations that provide necessary services, such as water and electricity.
*Technological monopoly
;Monopoly by merger
*:Control over proprietary technology or processes like Microsoft’s dominance in operating systems.<ref name=":02"></ref>
:Gaining market control from acquisitions and mergers.
*Pure monopoly
;Technological monopoly
*:Complete market control with no substitutes, though rare in practice.<ref name=":06"></ref>
:Exclusive patent rights on a product or process preventing competition.
*Discriminating monopoly
;Geographic monopoly
*:Charges different prices to consumer groups based on willingness to pay, business or leisure airline ticket pricing.<ref name=":01"></ref>
: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.


===Key characteristics===
{| class="wikitable" style="border-style: solid; border-width: 2px; text-align: center" cellpadding="5px"
|+ Monopoly types
|-
! style="text-align: left"| Type
! Mechanism
! Example
|-
! style="text-align: left"| Natural monopoly
| Economies of scale in infrastructure heavy sectors
| Public utilities
|-
! style="text-align: left"| Legal monopoly
| Government grants exclusive rights
| AT&T and pharmaceuticals patents
|-
! style="text-align: left"| Technological monopoly
| Control over proprietary innovations
| Microsoft Windows OS
|-
! style="text-align: left"| Discriminating monopoly
| Price differentiation by consumer segment
| Airlines (business vs. leisure fares)
|-
|}


'''Single producer'''
===Barriers to entry===
::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>
Barriers sustain monopolies by deterring potential competitors in multiple ways.
'''No close substitutes'''
#'''Financial barriers'''
::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>
#*''Economies of scale''
'''High barriers to entry'''
#*:Large-scale production lowers cots per unit and disadvantages smaller companies.<ref name=":02"></ref><ref name=":03"></ref>
::Significant obstacles prevent competitors from entering the market.
#*''Sunk costs''
::*Legal barriers
#*:High initial investments like research and development deter new firms.<ref name=":06">{{Cite web |last=Emerson |first=Patrick |date= |title=Intermediate Microeconomics |url=https://open.oregonstate.education/intermediatemicroeconomics/chapter/module-15/ |website=oregonstate.education}}</ref>
::::Patents, copyrights, government licenses.
#*''Resource control''
::*Control of essential resources
#*:Ownership of critical inputs (e.g., De Beers’ diamond reserves).<ref name=":05"></ref>
::::Owning key manufacturing processes or mining operations
#'''Legal barriers'''
::*Economies of scale
#*''Patents/Copyrights''
::::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>
#*:Temporary exclusivity for inventions or creative works.<ref name=":07">{{Cite web |date=July 2023 |title=Monopoly |url=https://www.law.cornell.edu/wex/monopoly |website=law.cornell.edu}}</ref>
::*Network effects:
#*''Licenses/Franchises''
::::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>
#*:Government-mandated permits (e.g., broadcast spectrum licenses).<ref name=":04"></ref>
::*Deliberate exclusionary practices:
#'''Strategic barriers'''
::::Predatory pricing or exclusive contracts.
#*''Network effects''
#*:Value increases with user base (e.g., social media platforms)
#*''Predatory pricing''
#*:Temporarily lowering prices to drive out competitors.<ref name=":01"></ref>


===Price maker ability===
===Effects of monopolies===
:The monopolist can set prices rather than accept market prices.
*''Negative effects''
*'''Downward-sloping demand curve'''
:# Profit maximization often reduces supply and raises prices.
::Unlike competitive firms, monopolists face the entire market demand curve.
:# Lack of alternatives limits product variety and quality.<ref name=":05"></ref>
*'''Price discrimination strategies'''
:# Absence of competition diminishes incentives for improvement.<ref name=":02"></ref>
:*First-degree
:# Monopoly profits exacerbate wealth gaps.<ref name=":06"></ref>
:::Charging each customer their maximum willingness to pay.
*''Positive effects''
:*Second-degree
:# Lower production costs can translate to affordable prices.<ref name=":01"></ref><ref name=":07"></ref>
:::Pricing varies by quantity purchased.
:# Essential for long-term infrastructure planning (e.g., utilities).<ref name=":05"></ref>
:*Third-degree
:# Patents enable recouping R&D investments (e.g., pharmaceutical drugs)<ref name=":04"></ref>
:::Segmenting markets based on characteristics like age, location, or time of purchase.


===Monopoly process===
===Government regulation===
Governments try to curb monopoly abuses with antitrust laws, prohibiting anti-competitive practices such as price-fixing or predatory pricing; price regulation, capping the cost of essential services like utilities; and public ownership where the government directly controls a market, similar to Canada's healthcare system.<ref name=":06"></ref><ref name=":05"></ref> The DOJ mandated the breakup of AT&T in 1982 and filed antitrust suits against Microsoft in the 90s.<ref name=":06"></ref><ref name=":04"></ref>


;Profit maximization
===Emerging challenges===
:Primary objective is to increase the wealth of the owner or the shareholders of the firm by increasing the net profits.
Digital monopolies (tech giants) face global scrutiny over data control and market dominance.<ref name=":02"></ref>
 
Monopolists divert resources to maintain privileges such as lobbying against regulations.<ref name=":05"></ref> Global governance complicates regulating multinational firms.<ref name=":01"></ref> Monopolies can enable efficiency and innovation under regulation while unchecked power often hurts the consumer. Antitrust frameworks are needed to balance market control with public interest. Continuous regulatory adaptation remains vital to preserve competition and equity.
::Maximization process:
::*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.
 
==Why it is a problem==
Economists identify several significant problems with monopoly power:
 
===Higher prices and reduced output===
: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 from competitors, 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==
;*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:
::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:
::It accounts for 25% of eyewear sales worldwide, 80% of eyewear brands rely on Luxottica to design and manufacture glasses for them.
;*[[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):
::It was the largest and only telecommunications company in both the United States and Canada for most of the 20th century. Moreover, it kept on purchasing small communications companies to eliminate any competition and 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>
;*Tyson Foods.
;*Yoshida Kogyo KabushikiKaisha (YKK):
::Founded in 1934, currently controls 90% of the zipper market and is rarely accused of being a monopoly.


==References==
==References==
Retrieved from "https://consumerrights.wiki/Monopoly"