Monopoly: Difference between revisions

}}</ref> Monopolies are thus characterised by a lack of economic [[Competition (economics)|competition]] to produce the [[good (economics)|good]] or [[Service (economics)|service]], a lack of viable [[substitute good]]s, and the possibility of a high [[monopoly price]] well above the seller's [[marginal cost]] that leads to a high [[monopoly profit]].<ref>{{Cite book |last1= Blinder |first1= Alan S |first2= William J |last2= Baumol |first3= Colton L |last3= Gale |title= Microeconomics: Principles and Policy |type= paperback |date= June 2001 |publisher= Thomson South-Western |page= [https://archive.org/details/microeconomicspr0000baum/page/212 212] |chapter= 11: Monopoly |isbn= 0-324-22115-0 |quote= A pure monopoly is an industry in which there is only one supplier of a product for which there are no close substitutes and in which is very difficult or impossible for another firm to coexist |chapter-url= https://archive.org/details/microeconomicspr0000baum/page/212 }}</ref> The verb ''monopolise'' or ''monopolize'' refers to the ''process'' by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge [[Monopoly price|overly high prices, which is associated with aunfair decreaseprice in social surplusraises]].<ref name=Orbach&Campbell>{{cite journal | first1 = Barak | last1 = Orbach | first2 = Grace | last2 = Campbell | ssrn = 1856553 | title = The Antitrust Curse of Bigness | journal = Southern California Law Review | year = 2012}}</ref> Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).<ref name=Orbach&Campbell />

While monopoly and perfect competition markrepresent the extremes of market structures<ref name=Png-268>Png (1999), p. 268.</ref> there is some similarity. The cost functions are the same.<ref>{{ cite book | last = Negbennebor | first = Anthony | title = Microeconomics, The Freedom to Choose | publisher = CAT Publishing | year = 2001}}</ref> Both monopolies and perfectly competitive (PC) companies minimize cost and maximize profit. The shutdown decisions are the same. Both are assumed to have perfectly competitive factors markets. There are distinctions,; some of the most important distinctions are as follows:

As long as the [[price elasticity of demand]] for most customers is less than one in [[absolute value]], it is advantageous for a company to increase its prices: it receives more money for fewer goods. With a price increase, price elasticity tends to increase, and in the optimum case above it will be greater than one for most customers.<ref>{{citationCite journal |last=Publisher |first=Author removed at request of original needed|date=June2016-06-17 2012|title=5.1 The Price Elasticity of Demand |url=https://open.lib.umn.edu/principleseconomics/chapter/5-1-the-price-elasticity-of-demand/ |language=en-us}}</ref>

A government-granted monopoly (also called a "''[[de jure]]'' monopoly") is a form of ''[[coercive monopoly]]'', in which a government grants exclusive privilege to a private individual or company to be the sole provider of a commodity. Monopoly may be granted explicitly, as when potential competitors are excluded from the market by a specific [[primary legislation|law]], or implicitly, such as when the requirements of an administrative [[delegated legislation|regulation]] can only be fulfilled by a single market player, or through some other legal or procedural mechanism, such as [[patents]], [[trademarks]], and [[copyright]]. These monopolies can also be the result of "rent-seeking" behavior, where firms will try to get the prize of having a monopoly, and the increase of profits in acquiring one from a competitive market in their sector.<ref>{{cite book|publisher=Gale Cengage Learning|location=Detroit|editor-first=Thomas|editor-last=Riggs|editor-first2=Mary|editor-last2=Bonk|workseries=Everyday Finance: Economics, Personal Money Management, and Entrepreneurship|title=Government-Granted Monopoly|year=2008|isbn=978-1-4144-1049-4|ol=OL21557400M|lccn=2007035070|url=https://archive.org/details/everydayfinancee0000unse|access-date=6 November 2018}}</ref>

In an unregulated market, monopolies can potentially be ended by new competition, breakaway businesses, or consumers seeking alternatives. In a regulated market, a government will often either regulate the monopoly, convert it into a publicly owned monopoly environment, or forcibly fragment it (see [[Antitrust]] law and trust busting). [[Public utility|Public utilities]], often being naturally efficient with only one operator and therefore less susceptible to efficient breakup, are often strongly regulated or publicly owned. [[American Telephone & Telegraph]] (AT&T) and [[Standard Oil]] are often cited as examples of the breakup of a private monopoly by government. The [[Bell System]], later AT&T, was protected from competition first by the [[Kingsbury Commitment]], and later by a series of agreements between AT&T and the Federal Government. In 1984, decades after having been granted monopoly power by force of law, AT&T was broken up into various components, [[MCI Communications|MCI]], [[Sprint Corporation|Sprint]], who were able to compete effectively in the long-distance phone market. These breakups are due to the presence of deadweight loss and inefficiency in a monopolistic market, causing the Government to intervene on behalf of consumers and society in order to incite competition. {{citation needed|date=June 2012}} While the sentiment among regulators and judges has generally recommendedbeen thatagainst breakups are not as remedies for antitrust enforcement, recent scholarship has found that this hostility to breakups by administrators is largely unwarranted.<ref name="Van Loo">{{Cite journal|last=Van Loo|first=Rory|date=2020-01-01|title=In Defense of Breakups: Administering a "Radical" Remedy|url=https://scholarship.law.bu.edu/faculty_scholarship/954|journal=Cornell Law Review|volume=105 |issue=7 |page=1955 }}</ref>'''{{rp|1}}''' In fact, some scholars have argued that breakups, even if incorrectly targeted, could arguably still encourage collaboration, innovation, and efficiency.<ref name="Van Loo" />'''{{rp|49}}'''

The law regulating dominance in the European Union is governed by Article 102 of the ''[[Treaty on the Functioning of the European Union]]'' which aims at enhancing the consumer's welfare and also the efficiency of allocation of resources by protecting competition on the downstream market.<ref>DG Competition, ''DG Competition discussion paper on the application of Article [102] of the Treaty to exclusionary abuses'' [2005] [http://ec.europa.eu/competition/antitrust/art82/discpaper2005.pdf PDF]. {{Webarchive|url=https://web.archive.org/web/20180508145349/http://ec.europa.eu/competition/antitrust/art82/discpaper2005.pdf |date=8 May 2018 }}. accessed 4 May 2018.</ref> The existence of a very high market share does not always mean consumers are paying excessive prices, since the threat of new entrants to the market can restrain a high-market-share company'scompany’s price increases. Competition law does not make merely having a monopoly illegal, but rather abusing the power a monopoly may confer, for instance, through exclusionary practices (i.e., pricing high just because it is the only one around). It mayshould also be noted that it is illegal to try to obtain a monopoly, bythrough practices oflike buying out the competition, or equalsimilar practicesmethods. If onea monopoly occurs naturally, such as a competitor going out of business, or a lack of competition, it is not illegal until such time as the monopoly holder abuses thetheir power.

First, it is necessary to determine whether a company is dominant, or whether it behaves "to“to an appreciable extent independently of its competitors, customers, and ultimately of its consumer"consumers.” Establishing dominance is a two-stage test. The first thing to consider is market definition, which is one of the crucial factors of the test.<ref>Case 6/72 ''Europemballage Corpn and Continental Can Co Inc v Commission'' [1973] ECR 215</ref> ItThis includes the relevant product market and the relevant geographic market.

In the 17th century, Shah Abbas established New Julfa (a suburb in the capital of Isfahan) to concentrate [[Armenia]]n financial capital in Iran. Accordingly, he gave [[Armenia]]ns various privileges, including the monopoly to trade Persian filoselle (raw silk). Armenians exported it all over the world, including Asia, Europe, and America. By the 1750s, Armenia already controlled 75% of the total silk trade in the area. This resulted in a boom in Armenian commerce, which lasted for the next 150 years.<ref>{{Cite journal|last=Bakhchinyan|first=Artsvi|date=2017|title=The Activity of Armenian Merchants in International Trade|url=https://src-h.slav.hokudai.ac.jp/rp/publications/no14/14-03_Bakhchinyan.pdf|journal=|pages=24}}</ref>{{Better source needed|reason=The current source is insufficiently reliable ([[WP:NOTRS]]).|date=September 2023}} At present, as it happens, Armenia's own economy is itself highly monopolized; in fact, with 19% of its economy monopolized, Armenia was the most monopolized country in Eastern Europe and Central Asia in 2009. <ref>{{Cite journal |last=Mikaelian |first=Hrant |date=2015 |title=Informal Economy of Armenia Reconsidered |url=https://www.academia.edu/14915579 |journal=Caucasus Analytical Digest |issue=75 |pages=2–6 |via=Academia.edu}}</ref>

The [[Comcast]] Corporation is the largest [[mass media]] and [[communications]] company in the world by revenue.<ref name="mediadb.eu">[http://www.mediadb.eu/en/data-base/international-media-corporations/comcastnbcuniversal-llc.html IfM – Comcast/NBCUniversal, LLC] {{Webarchive|url=https://web.archive.org/web/20180608214927/http://www.mediadb.eu/en/data-base/international-media-corporations/comcastnbcuniversal-llc.html |date=8 June 2018 }}. Mediadb.eu (2013-11-15). Retrieved on 2013-12-09.</ref> It is the largest [[cable television|cable]] company and home [[Internet service provider]] in the United States, and the nation's third largest home [[telephone service provider]]. Comcast has a monopoly in [[Boston]], [[Philadelphia]], and many small towns across the US.{{citation<ref needed|datename=July"islr.org">[https://ilsr.org/wp-content/uploads/2020/08/2020_08_Profiles-of-Monopoly.pdf 2013}}Profiles of Monopoly: Big Cable and Telecom] ilsr.org (2020-08). Retrieved on 2024-05-30.</ref>

=== Other examplesExamples of possible/potential monopolies ===