Chap20

• Monopoly


  A situation where there is one dominant seller in the market (lack of high competition)
• Monopolists


  • Google
  • Facebook (60%)
  • Intel (chip manufacturer – 80%)
• Pure monopoly


  A market supplied by just one producer
• Legal monopoly


  One firm has more than 25% of a market share
• Local monopoly


  One firm supplies an entire local market
• Natural monopoly


  It is more efficient if just one firm supplies all consumers like rail travel, water and electricity providers
• Natural monopolies can serve at a lower cost than would be possible if market was composed of many smaller firms due to very high fixed costs
• Consumers may benefit from natural monopolies as costs will be lower than if there were many firms competing in the industry
• Monopoly


  • One business dominates the market
  • Unique product: highly differentiated – the only one available – no other choice for the consumer
  • Price-maker: able to set the price charged in the whole market
• Barriers to entry


  • Legal barriers: exclude competition legally
  • Patent: license that grants permission to operate as a sole producer of a newly designed product
  • Marketing budgets: strong brand names – difficult for other to compete
  • Technology: access to complex or up-to-date technology
  • High start–up costs: too high initial cost to compete existing operators