What is a monopoly? What can she be? What are the differences between its different species?
General information
So, for starters, let's define what a monopoly is. This is the name of the position in the economic process or the situation with the presence of a single seller, as a result of which there is no competitiveness (competition) between different suppliers of services and goods.
It should be noted that there are quite a few types of it, depending on the circumstances. The ideal position for a monopolist is a situation in which there are no substitute products (substitutes). Although in practice they always exist, the only question is how effective they are and whether they can help meet an existing need.
What are the types of monopolies?
Economics distinguishes between the following types:
- Closed monopoly. Provides for limited access to information, resources, licenses, technologies and other important aspects. Sooner or later, it will open.
- Natural monopoly. Her definition is as follows:this is a provision that provides for the existence of competitiveness and competition, as a result of which average costs reach their minimum when the company serves the market as a whole. But at the same time, it exists only where, due to various circumstances, it is profitable to create something only within the framework of one company, and not several.
- Open monopoly. The state of affairs where a company becomes the sole provider of a service or product, and this is not affected by any special restrictions on competition. An example is a breakthrough in a certain area through the creation of a new unique product. You can also use position with brands.
- Monopoly price discrimination. It occurs when different prices are set for different units of the same product. Appears when the buyer is divided into groups.
- Resource monopoly. Provides a restriction on the use of a particular good. The definition of "resource monopoly" can be more easily understood using a small example: there is a need for a forest. But it will not be possible to get wood faster than forestry enterprises grow it. In addition, there is a certain restriction on the territory.
- Pure monopoly. In this situation, there is only one seller, and there are no close substitutes in other industries. Pure monopoly is defined as having a unique product.
Conventionally, all species can be divided into three main classes: natural, economic and administrative. We will now consider them.
Natural monopoly
It arises due to the influence of objective reasons. It is usually based on specific features of customer service or production technology.
What is a natural monopoly? The definition of this situation would be incomplete without examples. You can meet her in the field of energy supply, communications, telephone services, and so on. There are a small number of companies in these industries (and sometimes there is only one state-owned enterprise). And thanks to this, they occupy a monopoly position in the country's market. For example, space exploration. Fifty years ago, only states could do this for a number of reasons. But now there is already one private company that offers its services.
Administrative (state) monopoly
It appears as a result of the influence of the authorities. So, it can be expressed in the fact that individual companies are granted the exclusive right to carry out a specific type of activity. As an example, we can cite the organizational structures of state enterprises, which are united and subordinate to various associations, ministries or central administrations.
This approach is used, as a rule, to unite within the same industry. In the market, they act as one economic entity, which implies the absence of competition. An example is the former Soviet Union. That's what a state monopoly is. The definition does not providethe existence of such a provision throughout the country.
Take, for example, the military industry. It is necessary to make sure that she is ready for all sorts of troubles and surprises. And if it is transferred to private hands, then the greatest harm can be done to the military industry. And this should not be allowed under any circumstances. Therefore, it is under the control of the state.
Economic monopoly
This is the most common class. If we consider what this monopoly is, definition by history, trends in the development of society, then the following feature should be noted: compliance with the laws of the economic sector. The central object in this case is the entrepreneur. He can obtain a monopoly position in two ways:
- Successfully develop the enterprise, constantly increasing its scale through the concentration of capital.
- Combine with other people on a voluntary basis (or by absorbing bankrupts).
Over time, such a scale is achieved that we can talk about market dominance.
How does a monopoly come about?
Modern economic science identifies three main ways of this process:
- Conquest of the market by a separate enterprise.
- Conclusion of an agreement.
- Using product differentiation.
The first path is very difficult. This is confirmed by the factexclusivity of such entities. But at the same time, it is also considered the most decent one due to the fact that the conquest of the market occurs on the basis of efficient operation and gaining a competitive advantage over other enterprises.
More common is an agreement between several large firms. Through it, a situation is created in which manufacturers (or sellers) act as a “united front”. In this case, the competition is reduced to nothing. And first of all, the price aspect of interaction is under the gun.
The logical result of all this is that the buyer finds himself in uncontested conditions. It is believed that for the first time such situations began to arise towards the end of the 19th century. Although in fairness it should be noted that such monopolistic tendencies began to manifest themselves in ancient times. But the latest history of this phenomenon dates back to the economic crisis of 1893.
Negative influence
Monopoly is often perceived in a negative way. Why is that? This largely explains the correlation between crises and monopolies. How does everything happen? There are two options here:
- The monopoly was established during the crisis by a few businesses to stay afloat. In this case, it is easier for them to get through difficult times.
- The monopoly enterprise created the conditions for the crisis in order to force small players out of the market and take their market share for themselves.
In both cases, monopolies are largestructures that account for a significant amount of production. Due to their dominant position in the market, they can influence the pricing process, achieving favorable prices for themselves and making significant profits.
It should be noted that the monopoly position is the desire and dream of every enterprise and company. Thanks to this, you can get rid of a large number of risks and problems that competition brings. In addition, in this case they occupy a privileged position in the market and concentrate economic power in their hands. And this already opens the way for imposing their conditions on contractors and even society.
Speciality of monopolies
It is necessary to pay attention to certain specifics in economics, which studies this influence. It should be noted that this is not mathematics, and here many terms may have a different interpretation, and some may not be recognized in individual textbooks / collectives.
Let's consider an example. At the beginning of the article, the definition of pure monopoly was mentioned, but this does not mean at all that everything is exactly so. It is quite possible to find information about the presence of additional aspects or a slightly different interpretation of the term. This does not mean that one of them is wrong. There is simply no concept approved at the state / international level. And as a result, various interpretations appear.
The same could be said if we considered an artificial monopoly. The definition of this term could be given as follows: a situation whensuch conditions for an individual enterprise that it affects the entire market. It's right? Undoubtedly! But if you say that an artificial monopoly is the concentration of resources, production and sales in one hand through a cartel or trust, then this is also true!
Conclusion
That was the definition of the word "monopoly". It should be noted that this is a very extensive and interesting topic. But the size of the article is limited. We could also talk about the practical features of monopolies in various parts of the world, consider the situation in the countries of the former USSR, find out what and how in Western Europe and the USA. There is a great deal of material on this topic. As they say, whoever seeks will find.
