Monopoly: Difference between revisions
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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. | 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?== | ==Whatsa monopoly?== | ||
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#*Enables manipulation of supply, prices, and consumer behavior.<ref name=":02"></ref> | #*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" | {| class="wikitable" style="border-style: solid; border-width: 2px; text-align: center" cellpadding="4px" | ||
|+ Key characteristics of monopolies | |+Key characteristics of monopolies | ||
|- | |- | ||
! scope="col" style="text-align: left"| Characteristic | ! scope="col" style="text-align: left" |Characteristic | ||
! Description | !Description | ||
! Implication | !Implication | ||
|- | |- | ||
! scope="col" style="text-align: left"| Single seller | ! scope="col" style="text-align: left" |Single seller | ||
| Sole provider of a product/service | |Sole provider of a product/service | ||
| No market competition | |No market competition | ||
|- | |- | ||
! scope="col" style="text-align: left"| Price setting | ! scope="col" style="text-align: left" |Price setting | ||
| Ability to set prices above competitive levels | |Ability to set prices above competitive levels | ||
| Higher consumer prices | |Higher consumer prices | ||
|- | |- | ||
! scope="col" style="text-align: left"| Barriers to Entry | ! scope="col" style="text-align: left" |Barriers to Entry | ||
| Obstacles like patents, high startup costs, or resource control | |Obstacles like patents, high startup costs, or resource control | ||
| Sustained market dominance | |Sustained market dominance | ||
|- | |- | ||
! scope="col" style="text-align: left"| No Close Substitutes | ! scope="col" style="text-align: left" |No Close Substitutes | ||
| Unique product offering | |Unique product offering | ||
| Consumer dependency on monopolist | |Consumer dependency on monopolist | ||
|- | |- | ||
|} | |} | ||
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{| class="wikitable" style="border-style: solid; border-width: 2px; text-align: center" cellpadding="5px" | {| class="wikitable" style="border-style: solid; border-width: 2px; text-align: center" cellpadding="5px" | ||
|+ Monopoly types | |+Monopoly types | ||
|- | |- | ||
! style="text-align: left"| Type | ! style="text-align: left" |Type | ||
! Mechanism | !Mechanism | ||
! Example | !Example | ||
|- | |- | ||
! style="text-align: left"| Natural monopoly | ! style="text-align: left" |Natural monopoly | ||
| Economies of scale in infrastructure heavy sectors | |Economies of scale in infrastructure heavy sectors | ||
| Public utilities | |Public utilities | ||
|- | |- | ||
! style="text-align: left"| Legal monopoly | ! style="text-align: left" |Legal monopoly | ||
| Government grants exclusive rights | |Government grants exclusive rights | ||
| AT&T and pharmaceuticals patents | |AT&T and pharmaceuticals patents | ||
|- | |- | ||
! style="text-align: left"| Technological monopoly | ! style="text-align: left" |Technological monopoly | ||
| Control over proprietary innovations | |Control over proprietary innovations | ||
| Microsoft Windows OS | |Microsoft Windows OS | ||
|- | |- | ||
! style="text-align: left"| Discriminating monopoly | ! style="text-align: left" |Discriminating monopoly | ||
| Price differentiation by consumer segment | |Price differentiation by consumer segment | ||
| Airlines (business vs. leisure fares) | |Airlines (business vs. leisure fares) | ||
|- | |- | ||
|} | |} | ||
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===Effects of monopolies=== | ===Effects of monopolies=== | ||
*''Negative effects'' | *''Negative effects'' | ||
:# Profit maximization often reduces supply and raises prices. | :#Profit maximization often reduces supply and raises prices. | ||
:# Lack of alternatives limits product variety and quality.<ref name=":05"></ref> | :#Lack of alternatives limits product variety and quality.<ref name=":05"></ref> | ||
:# Absence of competition diminishes incentives for improvement.<ref name=":02"></ref> | :#Absence of competition diminishes incentives for improvement.<ref name=":02"></ref> | ||
:# Monopoly profits exacerbate wealth gaps.<ref name=":06"></ref> | :#Monopoly profits exacerbate wealth gaps.<ref name=":06"></ref> | ||
*''Positive effects'' | *''Positive effects'' | ||
:# Lower production costs can translate to affordable prices.<ref name=":01"></ref><ref name=":07"></ref> | :#Lower production costs can translate to affordable prices.<ref name=":01"></ref><ref name=":07"></ref> | ||
:# Essential for long-term infrastructure planning (e.g., utilities).<ref name=":05"></ref> | :#Essential for long-term infrastructure planning (e.g., utilities).<ref name=":05"></ref> | ||
:# Patents enable recouping R&D investments (e.g., pharmaceutical drugs)<ref name=":04"></ref> | :#Patents enable recouping R&D investments (e.g., pharmaceutical drugs)<ref name=":04"></ref> | ||
===Government regulation=== | ===Government regulation=== | ||