vikram chawla
Vikram Chawla
Introduction---
Monopoly is the market condition in which we have only one provider of a particular service. Such a situation is beneficial for service providers as they enjoy the freedom of lack of market competitors. The customer has no alternatives for the available service and has to buy the service at given facilities and cost.
Market monopoly is what most of the top business eye at. It can make you earn lots of buck. Bill Gates, the richest man in world is an example of a person who understood and exploited it. There are many reasons why it occurs. Few of them are mentioned below:
1) When a businessman acquires resources for a product which other fellow people can’t get.
2) When one gets skilled enough such that others can’t touch his level of skill for that service.
3) The product gives excellent utilities and is most user-friendly.
4) May be the product or service is newly invented and hence the technology available reserved with that supplier.
5) A violation to above definition of monopoly can be when there are enough competitors but the service provided by this monopolist is unique in every sense to satisfy customers need.
The role of government also comes into picture at times when it prohibits the production of particular service by citizens of its country. It does this by imposing fine and registering the case to be against law. A Government puts lots of restriction on production of certain products. Generally the Government does this in cases where the availability of that service may cause severe national and international threat e.g. arms and ammunition, currency, nuclear weapons etc. Such market policy is often called state monopoly.
When a service provider obeys all the rules laid down by that Government and yet is able to enjoy the market supremacy then such situation is termed as Government granted monopoly. The term natural monopoly is used to refer to monopolist that acquire the entire market for service of its type because of the amount of production he makes comparative to others to fulfill the market demands for that service.
Generally monopoly is viewed as person getting hold of market by implementing unfair means such as providing the service at much low cost than other service providers and causing the competitor to bear heavy financial loss. This result in removing opponent’s existence from market and the monopolist again raises his service price to recover the losses. This was what Microsoft did and cases filed against its chairman.
There are some commodities for e.g. oil, gasoline etc whose availability and production is more in gulf countries. The availability of these products is limited, but the requirement is much more hence their prices are high. This monopoly is unfortunate and is difficult to be controlled since these resources are provided by nature. Hence man has started searching for alternative fuels Sometimes a company produces more services than its main product by giving them other brand names just to avoid the competitors in that field. For e.g. say a book seller sells book for same subject but with different contents with other brand names just to give an illusion that they are from two different companies but the owner being the same. In such a case a company is said to be using monopolistic tactics.
There is solution to overcome this situation. Since to become monopolist many things are done illegally and therefore can be prevented by complaining against the firm in judiciary. Most of the times a government steps in to either regulate the monopoly, or forcibly break it up. For example AT&T had the monopoly in early decades. After it was broken up into the Baby Bell components, MCI, Sprint, and other companies were able to compete effectively in the long-distance phone market and started to take phone traffic from the less efficient AT&T.
In terms of economics a firm is said to have monopoly power if it faces a downward sloping demand curve. As against this a price taker faces a horizontal demand curve. If the service provider sets a high value, they will sell none. Contrary to this they will sell enough products if sold at affordable prices. It entirely depends on monopolist how he wants to harness the market situation. Generally an ideal situation in this worst case of market monopoly can be when the service provider sells his service at such a price that can be beneficial for both buyer and seller. Also the money collected by monopolist being used in research of more efficient and better than his available service.
In today’s modern jet age everyone being smart enough, there is healthy competition for all types of services and it’s very difficult to make monopoly. Although monopoly undesirable can prove helpful in many cases if properly handled. It’s said that with great power comes great responsibility and so this situation although gives you market command along with that you also have to look for the unread social responsibility that comes to you.
TYPES OF MONOPOLIES
Pure Monopolies
A pure monopoly is a firm that satisfies the following conditions:
It is the only supplier in the market.
There is no close substitute to the output good.
There is no threat of competition.
In practice, pure monopolies are very rare. For instance, a supermarket may be the only food supplier in a particular town, but if it raises its prices and retains too much of a profit, a competitor may enter the space. Even the threat of serious competition entering the market forces the existing firm to act conscionably, and differently from how it would act otherwise. A train company may be the only carrier in a particular station, but if cars are also available in the area, there exists a close substitute to the output good.
Natural Monopoly
A natural monopoly is a firm with such extreme economies of scale that once it begins creating a certain level of output, it can produce more at a far lower cost than any smaller competitor. Natural monopolies exist far more frequently than pure monopolies, mainly because the requirements are not as stringent.
Natural monopolies occur when, for whatever reason, the average cost curves decline over a relevant span of output quantities. A firm with high fixed costs relative to its marginal costs will have declining average costs for a significant span of quantities. A firm with a decreasing marginal cost structure will also have declining average costs. For example, utilities and software are two industries where natural monopolies occur often.
SOME EXAMPLES
DISCRIMINATING MONOPOLY--
ELECTRICITY COMPANIES
PRIVATE MONOPOLY--
TATA AIRLINES
SOCIAL MONOPOLY--
ATOMIC ENERGY
LEGAL MONOPOLY--
BRANDS
NATURAL MONOPOLY--
DIAMONDS:SA
:juggle:
Monopoly is the market condition in which we have only one provider of a particular service. Such a situation is beneficial for service providers as they enjoy the freedom of lack of market competitors. The customer has no alternatives for the available service and has to buy the service at given facilities and cost.
Market monopoly is what most of the top business eye at. It can make you earn lots of buck. Bill Gates, the richest man in world is an example of a person who understood and exploited it. There are many reasons why it occurs. Few of them are mentioned below:
1) When a businessman acquires resources for a product which other fellow people can’t get.
2) When one gets skilled enough such that others can’t touch his level of skill for that service.
3) The product gives excellent utilities and is most user-friendly.
4) May be the product or service is newly invented and hence the technology available reserved with that supplier.
5) A violation to above definition of monopoly can be when there are enough competitors but the service provided by this monopolist is unique in every sense to satisfy customers need.
The role of government also comes into picture at times when it prohibits the production of particular service by citizens of its country. It does this by imposing fine and registering the case to be against law. A Government puts lots of restriction on production of certain products. Generally the Government does this in cases where the availability of that service may cause severe national and international threat e.g. arms and ammunition, currency, nuclear weapons etc. Such market policy is often called state monopoly.
When a service provider obeys all the rules laid down by that Government and yet is able to enjoy the market supremacy then such situation is termed as Government granted monopoly. The term natural monopoly is used to refer to monopolist that acquire the entire market for service of its type because of the amount of production he makes comparative to others to fulfill the market demands for that service.
Generally monopoly is viewed as person getting hold of market by implementing unfair means such as providing the service at much low cost than other service providers and causing the competitor to bear heavy financial loss. This result in removing opponent’s existence from market and the monopolist again raises his service price to recover the losses. This was what Microsoft did and cases filed against its chairman.
There are some commodities for e.g. oil, gasoline etc whose availability and production is more in gulf countries. The availability of these products is limited, but the requirement is much more hence their prices are high. This monopoly is unfortunate and is difficult to be controlled since these resources are provided by nature. Hence man has started searching for alternative fuels Sometimes a company produces more services than its main product by giving them other brand names just to avoid the competitors in that field. For e.g. say a book seller sells book for same subject but with different contents with other brand names just to give an illusion that they are from two different companies but the owner being the same. In such a case a company is said to be using monopolistic tactics.
There is solution to overcome this situation. Since to become monopolist many things are done illegally and therefore can be prevented by complaining against the firm in judiciary. Most of the times a government steps in to either regulate the monopoly, or forcibly break it up. For example AT&T had the monopoly in early decades. After it was broken up into the Baby Bell components, MCI, Sprint, and other companies were able to compete effectively in the long-distance phone market and started to take phone traffic from the less efficient AT&T.
In terms of economics a firm is said to have monopoly power if it faces a downward sloping demand curve. As against this a price taker faces a horizontal demand curve. If the service provider sets a high value, they will sell none. Contrary to this they will sell enough products if sold at affordable prices. It entirely depends on monopolist how he wants to harness the market situation. Generally an ideal situation in this worst case of market monopoly can be when the service provider sells his service at such a price that can be beneficial for both buyer and seller. Also the money collected by monopolist being used in research of more efficient and better than his available service.
In today’s modern jet age everyone being smart enough, there is healthy competition for all types of services and it’s very difficult to make monopoly. Although monopoly undesirable can prove helpful in many cases if properly handled. It’s said that with great power comes great responsibility and so this situation although gives you market command along with that you also have to look for the unread social responsibility that comes to you.
TYPES OF MONOPOLIES
Pure Monopolies
A pure monopoly is a firm that satisfies the following conditions:
It is the only supplier in the market.
There is no close substitute to the output good.
There is no threat of competition.
In practice, pure monopolies are very rare. For instance, a supermarket may be the only food supplier in a particular town, but if it raises its prices and retains too much of a profit, a competitor may enter the space. Even the threat of serious competition entering the market forces the existing firm to act conscionably, and differently from how it would act otherwise. A train company may be the only carrier in a particular station, but if cars are also available in the area, there exists a close substitute to the output good.
Natural Monopoly
A natural monopoly is a firm with such extreme economies of scale that once it begins creating a certain level of output, it can produce more at a far lower cost than any smaller competitor. Natural monopolies exist far more frequently than pure monopolies, mainly because the requirements are not as stringent.
Natural monopolies occur when, for whatever reason, the average cost curves decline over a relevant span of output quantities. A firm with high fixed costs relative to its marginal costs will have declining average costs for a significant span of quantities. A firm with a decreasing marginal cost structure will also have declining average costs. For example, utilities and software are two industries where natural monopolies occur often.
SOME EXAMPLES
DISCRIMINATING MONOPOLY--
ELECTRICITY COMPANIES
PRIVATE MONOPOLY--
TATA AIRLINES
SOCIAL MONOPOLY--
ATOMIC ENERGY
LEGAL MONOPOLY--
BRANDS
NATURAL MONOPOLY--
DIAMONDS:SA
:juggle: