Monopoly

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A monopoly is defined by:

  1. Lack of competiion
  2. No substitutes to the traded good or service exist
  3. Following market entry barriers exist: The monopolist controls a valuable input, Natural monopoly, Patents and Trademarks, State monopolies.

The monopolist can achieve profits in the long term because there is no competition.

Monopolies tend to hurt consumers because they tend to become less efficient/innovative over time. They tend to become complacent giants. Why? Because they dont have to openly compete in the market place. People cant switch to lower cost versions of the same product because only one supplier exists.

AT&T is a good example of this. When it was broken up into the "Baby Bell" components the initial fear was that AT&T would no longer provide high quality long distance phone calls. MCI (a former part of AT&T), Sprint (later merged) and others came into the phone market and started to take phone traffic from the less efficient AT&T.

See also: Microsoft antitrust case


Other market forms


Monopoly is also a popular board game. See monopoly/game