News tagged with monopoly
A monopoly (from Greek monos / μονος (alone or single) + polein / πωλειν (to sell)) exists when a specific person or enterprise is the only supplier of a particular commodity. (This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry)[clarification needed] Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods. The verb "monopolise" refers to the process by which a company gains much greater market share than what is expected with perfect competition.
A monopoly is distinguished from a monopsony, in which there is only one buyer of a product or service ; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations such that one or a few of the entities have market power and therefore interact with their customers (monopoly), suppliers (monopsony) and the other companies (oligopoly) in a game theoretic manner – meaning that expectations about their behavior affects other players' choice of strategy and vice versa. This is to be contrasted with the model of perfect competition in which companies are "price takers" and do not have market power.
When not coerced legally to do otherwise, monopolies typically maximize their profit by producing fewer goods and selling them at higher prices than would be the case for perfect competition. (See also Bertrand, Cournot or Stackelberg equilibria, market power, market share, market concentration, Monopoly profit, industrial economics). Sometimes governments decide legally that a given company is a monopoly that doesn't serve the best interests of the market and/or consumers. Governments may force such companies to divide into smaller independent corporations as was the case of United States v. AT&T, or alter its behavior as was the case of United States v. Microsoft, to protect consumers.
Monopolies can be established by a government, form naturally, or form by mergers. A monopoly is said to be coercive when the monopoly actively prohibits competitors by using practices (such as underselling) which derive from its market or political influence (see Chainstore paradox). There is often debate of whether market restrictions are in the best long-term interest of present and future consumers.
In many jurisdictions, competition laws restrict monopolies. Holding a dominant position or a monopoly of a market is not illegal in itself, however certain categories of behavior can, when a business is dominant, be considered abusive and therefore incur legal sanctions. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic interest group. Patents, copyright, and trademarks are all examples of government granted and enforced monopolies. The government may also reserve the venture for itself, thus forming a government monopoly.
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