Reasons for the emergence of monopolies:
- A high proportion of fixed costs that require one-time large investments in creating a business and in the event of competition do not pay off.
- Acquisition and merger of firms (when a larger firm buys a smaller firm, eliminating competition in the market).
- Legislative barriers to the implementation of activities; (licensing, certification).
- Desire to earn monopolistic profit - above average profit, possible as a result of the fact that the consumer is deprived of an alternative.
- Foreign economic policy. It aims to protect the market from foreign competition in order to support domestic entities. (Includes: imposition of duties on foreign goods, import restrictions or prohibitions).
Types:
- Natural monopoly (railway, water supply systems) - enterprises united by a single marketing organization, the state of the commodity market, in which the satisfaction of demand in this market is more efficient in the absence of competition due to technological features of production (due to a significant decrease in production costs per unit of goods as increase in the volume of production), and goods produced by subjects of natural monopoly cannot be replaced in consumption by other goods, and therefore the demand in this commodity market for goods produced by subjects of natural monopolies depends to a lesser extent on changes in the price of this product, than the demand for other types of goods. At the same time, there may be a situation where the company's services have analogues, but according to generally accepted standards, such a company is still considered a monopoly (for example, passenger transportation by rail competes with air transportation, but some railway companies are still considered a monopoly).
- State monopoly - a monopoly created by the force of legislative barriers that determine the commodity boundaries of the monopoly market, the subject of the monopoly (monopolist), the forms of control and regulation of its activities, as well as the competence of the regulatory body.
- Open monopoly - a temporary situation that exists as a result of the emergence of a new technology or product in the period until competitors have mastered this technology and the production of this product.
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Patents
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