Monopoly

• Monopoly (legal monopoly): one firm dominates over 25% of the market share

  As of 2023, Google dominates the UK search engine market with a market share of 86%
• Pure monopoly - one firm dominates 100% of the market share

  Thames Water is the sole supplier for water and water waste services in London
• Monopoly competition characteristics:

  • finite buys + sellers
  • differentiated goods
  • firms are price makers/ profit maximisers
  • High barriers of entry into market
  • imperfect information
• Goods produced by monopoly firms are price inelastic
• Firms take advantage of the imperfect knowledge about substitutes or costs of producing goods by increasing prices
• Creative destruction - When monopoly firms are so big they become complacent and another firm replaces them with innovative products
• Natural Monopoly - a market with only one dominant firm as sunk costs are so high average costs are always falling

  National Grid is the only firm that manages the UK electricity transmission network