Monopoly Wikipedia

However, the formalization of monopoly as a subject of economic analysis began in the late 19th and early 20th centuries, particularly with the advent of the Industrial Revolution. The term “monopoly” holds significant weight in economic discourse, business strategy, and legal considerations. Its implications are multi-faceted, affecting consumers, businesses, and governments alike. Here is an in-depth analysis of the word “monopoly,” categorized into definition, historical context, economic implications, legal aspects, and social impact. The structure of a market is also affected by the extent to which those who buy from it prefer some products to others.

Restriction no entry of the new firm.

Secondly, it stands alone and barriers prevent new firms from entering the industry; and thirdly, the actions of the monopolist itself affect the market price of its output—it is not a price-taker. There are no products (or services) that match the offerings of the monopolist firm. The absence of close substitutes makes the demand for monopolist products relatively inelastic. The demand is inelastic when it does not change much with a change in the price of the product. Monopolies can often lead to unfair trade practices like charging different prices from different consumers (price discrimination), setting prices far above the costs of manufacturing, selling inferior products and services, etc.

In this, the monopolist firm utilizes its copyright and patents to prevent competition. In addition, such firms usually provide public utilities (like electricity, gas, etc.), adhere to government regulations, and incur high costs on research and innovation. You’re probably familiar with the word monopoly, but you may not recognize its conceptual and linguistic relative, the much rarer oligopsony. Both monopoly and oligopsony are ultimately from Greek, although monopoly passed through Latin before being adopted into English. Another related word is monopsony, used for a more extreme oligopsony in which there is only a single buyer. A monopoly exists when one company dominates a market, facing no competition or close substitutes.

Definition of MONOPOLY

A monopoly is a market structure with a single dominant seller in a particular industry. Monopolies limit competition and consumer choice, and are typically discouraged in free-market economies. In the United States, laws enacted to restrict monopolies are intended to ensure that a single business is unable to control a market and take advantage of customers. To reduce prices and increase output, regulators often use average cost pricing. By average cost pricing, the price and quantity are determined by the intersection of the average cost curve and the demand curve.

Price discrimination allows a monopolist to increase its profit by charging higher prices for identical goods to those who are willing or able to pay more. For example, most economic textbooks cost more in the United States than in developing countries like Ethiopia. In this case, the publisher is using its government-granted copyright monopoly to price discriminate between the generally wealthier American economics students and the generally poorer Ethiopian economics students. Similarly, most patented medications cost more in the U.S. than in other countries with a (presumed) poorer customer base. Typically, a high general price is listed, and various market segments get varying discounts. This would allow the monopolist to extract all the consumer surplus of the market.

Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. The term monopoly is derived from the Greek word ‘Mono’ which means single and ‘poly’ which means seller. Monopoly is a market in which there is only one seller who controls the entire market supply for a product which has no close substitute. Various manufacturers of the game have created dozens of officially licensed versions, in which the names of the properties and other elements of the game are replaced by others according to the game’s theme. Official corporate editions have been produced for Best Buy, the Boy Scouts of America, Cornwell Quality Tools, FedEx, Target, Marriott and UPS, among others. In 1995, a second license was awarded to Winning Moves Games in Massachusetts.

Cite this Entry

It sums up the squares of the individual market shares of all of the competitors within the market. The lower the total, the less concentrated the market and the higher the total, the more concentrated the market. In the US, the merger guidelines state that a post-merger HHI below 1000 is viewed as not concentrated while HHIs above that will provoke further review. As the definition of the market is of a matter of interchangeability, if the goods or services are regarded as interchangeable then they are within the same product market. The demand substitutability of the goods and services will help in defining the product market and it can be access by the ‘hypothetical monopolist’ test or the ‘SSNIP’ test. A company wishing to practice price discrimination must be able to prevent middlemen or brokers from acquiring the consumer surplus for themselves.

What are some examples of monopolies in India?

When this situation occurs, it is always more efficient for one large company to supply the market than multiple smaller companies; in fact, absent government intervention in such markets, will naturally evolve into a monopoly. Often, a natural monopoly is the outcome of an initial rivalry between several competitors. An early market entrant that takes advantage of the cost structure and can expand rapidly can exclude smaller companies from entering and can drive or buy out other companies. A natural monopoly suffers from the same inefficiencies as any other monopoly. Left to its own devices, a profit-seeking natural monopoly will produce where marginal revenue equals marginal costs.

Such companies need to adhere to government policies while conducting business. The Herfindahl-Hirschman index indicates the competition or the market concentration of an industry. It is obtained by squaring the size of write the meaning of monopoly the different firms in the industry and summing the resulting numbers. Lower HHI indicates more competition, while a higher one indicates less or no competition (i.e., monopoly). A natural monopoly depends on unique raw materials or sophisticated technology to manufacture its products.

• Most travelers assume that this practice is strictly a matter of security.
• After Nearing was dismissed from the Wharton School, he began teaching at the University of Toledo.
• These are done for smaller cities, sometimes as charity fundraisers, and some have been created for college and university campuses.
• The single manufacturer has the power to set the prices of its products or services.

In some industries the products are regarded as identical by their buyers—as, for example, basic farm crops. In others the products are differentiated in some way so that various buyers prefer various products. Notably, the criterion is a subjective one; the buyers’ preferences may have little to do with tangible differences in the products but are related to advertising, brand names, and distinctive designs. In another instance of a tech giant avoiding the forced sale of a key business because the industry is evolving so quickly, a federal judge ruled that Meta Platforms isn’t an illegal monopoly.

• Airlines charge higher prices to business travelers than to vacation travelers.
• The task for the seller is to identify these price points and to reduce the price once one is reached in the hope that a reduced price will trigger additional purchases from the consumer.
• In early 1935, however, the company heard about the game’s excellent sales during the Christmas season of 1934 in Philadelphia and at F.A.O. Schwarz in New York City.
• This, in turn, led to a worldwide “Here & Now” edition (released in 2008), along with other national editions (including a second UK “Here and Now” edition) with properties selected by online vote.
• Price fixing is an agreement among competitors to raise, lower, maintain, or stabilize prices or price levels.

However, the one monopoly profit theorem is not true if customers in the monopoly good are stranded or poorly informed, or if the tied good has high fixed costs. Most economic textbooks follow the practice of carefully explaining the “perfect competition” model, mainly because this helps to understand departures from it (the so-called “imperfect competition” models). All items stamped with the red MONOPOLY logo also feature the word “Brand” in small print. In the mid-1980s, after the success of the first “collector’s tin anniversary edition” (for the 50th anniversary), an edition of the game was produced by the Franklin Mint, the first edition to be published outside Parker Brothers. At about the same time, McDonald’s started its first Monopoly game promotions, considered the company’s most successful, which continue to the present. The original hand made editions of the Monopoly game had been localized for the cities or areas in which it was played, and Parker Brothers has continued this practice.

The most popular properties were released on the US “Here & Now” edition board in 2006. This, in turn, led to a worldwide “Here & Now” edition (released in 2008), along with other national editions (including a second UK “Here and Now” edition) with properties selected by online vote. The main principle of the “Here & Now” editions was “What if Monopoly had been invented today?” After Parker Brothers was taken over by General Mills, the Monopoly license to Waddingtons was renegotiated (as was the Clue/Cluedo license to Parker Brothers/General Mills by Waddingtons). In 1975, another anniversary edition was produced, but this edition came in a cardboard box looking much like a standard edition. Parker Brothers was under management by General Mills as the first six Monopoly Tournaments were held.

Measuring Monopoly Power

Steel made 67 percent of all the steel produced in the United States. However, U.S. Steel’s share of the expanding market slipped to 50 percent by 1911, and antitrust prosecution that year failed. Aristotle describes Thales of Miletus’s cornering of the market in olive presses as a monopoly (μονοπώλιον). The meaning and understanding of the English word ‘monopoly’ has changed over the years. There are three main types of abuses which are exploitative abuse, exclusionary abuse and single market abuse.

Western Union was criticized as a “price gouging” monopoly in the late 19th century. In the case of Telecom New Zealand, local loop unbundling was enforced by central government. De Beers’ market share by value fell from as high as 90% in the 1980s to less than 40% in 2012, having resulted in a more fragmented diamond market with more transparency and greater liquidity. Steel in 1901 by combining Andrew Carnegie’s Carnegie Steel Company with Gary’s Federal Steel Company and William Henry “Judge” Moore’s National Steel Company. Steel was the largest steel producer and largest corporation in the world.

This rule was later dropped by the Quakers, and in the current game of Monopoly an auction takes place only when an unowned property is not purchased outright by the player that first lands on it. That same decade, the game became popular around the community of Reading, Pennsylvania. Another former student of Scott Nearing, Thomas Wilson, taught the game to his cousin, Charles Muhlenberg, around 1915–1916. Charles Muhlenberg and his wife, Wilma, taught the game to Wilma’s brothers, Louis and Ferdinand “Fred” Thun, in the early 1920s. In 1903, Georgist Lizzie Magie applied for a patent on a game called The Landlord’s Game with the object of showing that rents enriched property owners and caused tenants to be impoverished.

Waddingtons version, their first board game, with locations from London substituted for the original Atlantic City ones, was first produced in 1936. Robert Barton, president of Parker Brothers, bought the rights to Finance from Knapp Electric later in 1935. Finance would be redeveloped, updated, and continued to be sold by Parker Brothers into the 1970s. Copeland continued sales of the latter game after Parker Brothers attempted a patent lawsuit against him. Parker Brothers held the Magie and Darrow patents, but settled with Copeland rather than going to trial, since Copeland was prepared to have witnesses testify that they had played Monopoly before Darrow’s “invention” of the game.

Monopoly was first marketed on a broad scale by Parker Brothers in 1935. A Standard Edition, with a small black box and separate board, and a larger Deluxe Edition, with a box large enough to hold the board, were sold in the first year of Parker Brothers’ ownership. Parker Brothers sets were the first to include die-cast metal tokens for playing pieces, initially using a battleship, a cannon, a clothes iron, a shoe, a top hat, and a thimble. George Parker himself rewrote many of the game’s rules, insisting that “short game” and “time limit” rules be included. On the original Parker Brothers board (reprinted in 2002 by Winning Moves Games), there were no icons for the Community Chest spaces (the blue chest overflowing with gold coins came later) and no gold ring on the Luxury Tax space.