Monopoly
Etymology
Latin monopōlium < Greek monopṓlion right of exclusive sale, equiv. to mono- mono- + pōl ( eîn ) to sell + -ion n. suffix
Definitions
1. exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices. 2. an exclusive privilege to carry on a business, traffic, or service, granted by a government. 3. the exclusive possession or control of something. 4. something that is the subject of such control, as a commodity or service. 5. a company or group that has such control. 6. the market condition that exists when there is only one seller. 7. ( initial capital letter ) a board game in which a player attempts to gain a monopoly of real estate by advancing around the board and purchasing property, acquiring capital by collecting rent from other players whose pieces land on that property.
Description
In economics, a monopoly (from Greek monos / μονος (alone or single) + polein / πωλειν (to sell)) exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. (This is in contrast to a monopsony which relates to a single entity's control over a market to purchase a good or service. And contrasted with oligopoly where a few entities exert considerable influence over an industry) Monopolies are thus characterised by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods. The verb "monopolise" refers to the process by which a firm gains persistently greater market share than what is expected under perfect competition.
A monopoly must be distinguished from monopsony, in which there is only one buyer of a product or service ; a monopoly may also have monopsony control of a sector of a 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. Monopolies, monopsonies and oligopolies are all situations where one or a few entities have market power and therefore must interact with their customers (monopoly), suppliers (monopsony) and the other firms (oligopoly) in a game theoretic manner - meaning that expectations about their behavior affects other players' choice of strategy and vice versa. This is to be contrasted with the model of perfect competition where firms are price takers and do not have market power. Monopolists typically produce fewer goods and sell them at a higher price than under perfect competition, resulting in abnormal and sustained profit.
In many jurisdictions, competition laws place specific restrictions on monopolies. Holding a dominant position or a monopoly in the market is not illegal in itself, however certain categories of behavior can, when a business is dominant, be considered abusive and therefore be met with legal sanctions. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic interest group. Patents, copyright, and trademarks are all examples of government granted and enforced monopolies. The government may also reserve the venture for itself, thus forming a government monopoly.[1]
