The government may also reserve the venture for itself, thus forming a government monopoly, for example with a state-owned company. Patents, copyrights, and trademarks are sometimes used as examples of government-granted monopolies. 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. Holding a dominant position or a monopoly in a market is often not illegal in itself however, certain categories of behavior can be considered abusive and therefore incur legal sanctions when business is dominant. In many jurisdictions, competition laws restrict monopolies due to government concerns over potential adverse effects. Monopolies can be established by a government, form naturally, or form by integration. Monopolies, monopsonies and oligopolies are all situations in which one or a few entities have market power and therefore interact with their customers (monopoly or oligopoly), or suppliers (monopsony) in ways that distort the 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. Ī monopoly may also have monopsony control of a sector of a market. A small business may still have the power to raise prices in a small industry (or market). Although monopolies may be big businesses, size is not a characteristic of a monopoly. In law, a monopoly is a business entity that has significant market power, that is, the power to charge overly high prices, which is associated with a decrease in social surplus. In economics, a monopoly is a single seller. The verb monopolise or monopolize refers to the process by which a company gains the ability to raise prices or exclude competitors. Monopolies are thus characterised by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller's marginal cost that leads to a high monopoly profit. 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 and duopoly which consists of a few sellers dominating a market. JSTOR ( January 2022) ( Learn how and when to remove this template message)Įnforcement authorities and organizationsĪ monopoly (from Greek μόνος, mónos, 'single, alone' and πωλεῖν, pōleîn, 'to sell'), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a specific person or enterprise is the only supplier of a particular thing.Unsourced material may be challenged and removed. Please help improve this article by adding citations to reliable sources. They do so by tightly restricting these organizations or by requiring them to split into a number of smaller competing companies.This article needs additional citations for verification. Some governments have a policy of restricting or breaking down monopolies. A business in this situation typically has poor customer service, since there is no incentive to improve its support of customer needs. They do so by restricting supply, thereby artificially creating a high-priced marketplace. It may also occur on a temporary basis when a business is granted a patent on a key product, so that competitors cannot sell the same product for a period of time.Ī business that is in a monopoly situation has a strong incentive to keep prices high, since there are no competitors who can compete on price. This situation most commonly arises when there are regulations blocking new entrants. The monopoly is more effective when there is a restriction on the ability of new competitors to enter the market. A monopoly occurs when one producer controls the supply of goods and services to customers.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |