3.4.5 - Monopolies

• A monopoly is a firm that is the only seller of a product
• High Pricing Power, No Interdependence, One Firm, Large Size of Firms, Asymmetric Information, High Product Differentiation, High Entry and Exit Barriers
• Examples of monopolies include: Tesco (monopoly and oligopoly), NHS, Thames Water, Coca Cola + Pepsi (duopoly), TFL
• Market power is the ability to set prices above a level that would exist in a competitive market
• Monopoly power is when one firm has the ability to set prices above a level that would exist in a competitive market without worrying about competitors. This leads to a lack of competition, high prices, and a lack of choice for consumers.
• A pure monopoly is a single supplier dominating the entire market (100% concentration ratio).
• A working (or legal) monopoly is a firm with greater than a 25% share of the market's total sales
• A dominant monopoly is a firm with at least a 40% market share
• Monopolies have price-setting (or making) power which results in a downward-sloping AR curve, they can set price or quantity but not both, the high barriers to entry help firms maintain supernormal profits in the anti-competitive structure, and profit maximising is assumed but some firms' objective is to maintain their market share.