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A monopoly (from Greek μόνος, mónos, 'single, alone' and πωλεῖν, pōleîn, 'to sell') exists when a specific person or enterprise is the only supplier of a particular commodity. This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few sellers dominating a market.[2] Monopolies are thus characterized by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller's marginal cost that leads to a high monopoly profit.[3] 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 overly high prices.[4] 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).[4]

A monopoly is distinguished from a 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 in which one or a few entities have market power and therefore interact with their customers (monopoly or oligopoly), or suppliers (monopsony) in ways that distort the market.

Monopolies can be established by a government, form naturally, or form by integration.

In many jurisdictions, competition laws restrict monopolies. Holding a dominant position or a monopoly in a market is often not illegal in itself, however certain categories of behavior can be considered abusive and therefore incur legal sanctions when business is dominant. 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, copyrights, and trademarks are sometimes used as examples of government-granted monopolies. The government may also reserve the venture for itself, thus forming a government monopoly.

Monopolies may be naturally occurring due to limited competition because the industry is resource intensive and requires substantial costs to operate.

Market structures


In economics, the idea of monopoly is important in the study of management structures, which directly concerns normative aspects of economic competition, and provides the basis for topics such as industrial organization and economics of regulation. There are four basic types of market structures in traditional economic analysis: perfect competition, monopolistic competition, oligopoly and monopoly. A monopoly is a structure in which a single supplier produces and sells a given product. If there is a single seller in a certain market and there are no close substitutes for the product, then the market structure is that of a "pure monopoly". Sometimes, there are many sellers in an industry and/or there exist many close substitutes for the goods being produced, but nevertheless companies retain some market power. This is termed monopolistic competition, whereas in oligopoly the companies interact strategically.

In general, the main results from this theory compare price-fixing methods across market structures, analyze the effect of a certain structure on welfare, and vary technological/demand assumptions in order to assess the consequences for an abstract model of society.

The boundaries of what constitutes a market and what does not are relevant distinctions to make in economic analysis.

Characteristics


  • Profit Maximizer: Maximizes profits.
  • Price Maker: Decides the price of the good or product to be sold, but does so by determining the quantity in order to demand the price desired by the firm.
  • High Barriers: Other sellers are unable to enter the market of the monopoly.
  • Single seller: In a monopoly, there is one seller of the good, who produces all the output.[5] Therefore, the whole market is being served by a single company, and for practical purposes, the company is the same as the industry.
  • Price Discrimination: A monopolist can change the price or quantity of the product. They sell higher quantities at a lower price in a very elastic market, and sell lower quantities at a higher price in a less elastic market.

Sources of monopoly power


Monopolies derive their market power from barriers to entry – circumstances that prevent or greatly impede a potential competitor's ability to compete in a market.

  • Economic barriers: Economic barriers include economies of scale, capital requirements, cost advantages and technological superiority.[7]
  • Economies of scale: Decreasing unit costs for larger volumes of production.[8] Decreasing costs coupled with large initial costs, If for example the industry is large enough to support one company of minimum efficient scale then other companies entering the industry will operate at a size that is less than MES, and so cannot produce at an average cost that is competitive with the dominant company. And if the long-term average cost of the dominant company is constantly decreasing, then that company will continue to have the least cost method to provide a good or service.[9]
  • Capital requirements: Production processes that require large investments of capital, perhaps in the form of large research and development costs or substantial sunk costs, limit the number of companies in an industry:[10] this is an example of economies of scale.
  • Technological superiority: A monopoly may be better able to acquire, integrate and use the best possible technology in producing its goods while entrants either do not have the expertise or are unable to meet the large fixed costs (see above) needed for the most efficient technology.[8]In]]Thus one large company can often produce goods cheaper than several small companies.[11]
  • No substitute goods: A monopoly sells a good for which there is no close substitute. The absence of substitutes makes the demand for that good relatively inelastic, enabling monopolies to extract positive profits.
  • Control of natural resources: A prime source of monopoly power is the control of resources (such as raw materials) that are critical to the production of a final good.
  • Network externalities: The use of a product by a person can affect the value of that product to other people. This is the network effect. There is a direct relationship between the proportion of people using a product and the demand for that product. In other words, the more people who are using a product, the greater the probability that another individual will start to use the product. This reflects fads, fashion trends,[12] social networks etc. It also can play a crucial role in the development or acquisition of market power. The most famous current example is the market dominance of the Microsoft office suite and operating system in personal computers.
  • Legal barriers: Legal rights can provide opportunity to monopolise the market in a good. Intellectual property rights, including patents and copyrights, give a monopolist exclusive control of the production and selling of certain goods. Property rights may give a company exclusive control of the materials necessary to produce a good.
  • Advertising- Advertising is most important to sell the product because of the single user they have to do it their own.
  • Manipulation: A company wanting to monopolise a market may engage in various types of deliberate action to exclude competitors or eliminate competition. Such actions include collusion, lobbying governmental authorities, and force (see anti-competitive practices).

In addition to barriers to entry and competition, barriers to exit may be a source of market power.

Monopoly versus competitive markets


While monopoly and perfect competition mark the extremes of market structures[14] there is some similarity.

  • Marginal revenue and price: In a perfectly competitive market, price equals marginal cost. In a monopolistic market, however, price is set above marginal cost.[16]
  • Product differentiation: There is zero product differentiation in a perfectly competitive market. Every product is perfectly homogeneous and a perfect substitute for any other. With a monopoly, there is great to absolute product differentiation in the sense that there is no available substitute for a monopolized good. The monopolist is the sole supplier of the good in question.[17]
  • Number of competitors: PC markets are populated by an infinite number of buyers and sellers. Monopoly involves a single seller.[17]
  • Barriers to Entry: Barriers to entry are factors and circumstances that prevent entry into market by would-be competitors and limit new companies from operating and expanding within the market. PC markets have free entry and exit. There are no barriers to entry, or exit competition. Monopolies have relatively high barriers to entry. The barriers must be strong enough to prevent or discourage any potential competitor from entering the market
  • Elasticity of Demand: The price elasticity of demand is the percentage change of demand caused by a one percent change of relative price. A successful monopoly would have a relatively inelastic demand curve. A low coefficient of elasticity is indicative of effective barriers to entry. A PC company has a perfectly elastic demand curve. The coefficient of elasticity for a perfectly competitive demand curve is infinite.
  • Excess Profits: Excess or positive profits are profit more than the normal expected return on investment. A PC company can make excess profits in the short term but excess profits attract competitors, which can enter the market freely and decrease prices, eventually reducing excess profits to zero.[18] A monopoly can preserve excess profits because barriers to entry prevent competitors from entering the market.[19]
  • Profit Maximization: A PC company maximizes profits by producing such that price equals marginal costs. A monopoly maximises profits by producing where marginal revenue equals marginal costs.[20]
  • P-Max quantity, price and profit: If a monopolist obtains control of a formerly perfectly competitive industry, the monopolist would increase prices, reduce production, and realise positive economic profits.[21]
  • Supply Curve: in a perfectly competitive market there is a well defined supply function with a one-to-one relationship between price and quantity supplied.[22] In a monopolistic market no such supply relationship exists. A monopolist cannot trace a short term supply curve because for a given price there is not a unique quantity supplied. As Pindyck and Rubenfeld note, a change in demand "can lead to changes in prices with no change in output, changes in output with no change in price or both".[23] Monopolies produce where marginal revenue equals marginal costs. For a specific demand curve the supply "curve" would be the price/quantity combination at the point where marginal revenue equals marginal cost. If the demand curve shifted the marginal revenue curve would shift as well and a new equilibrium and supply "point" would be established. The locus of these points would not be a supply curve in any conventional sense.[24][25]

The most significant distinction between a PC company and a monopoly is that the monopoly has a downward-sloping demand curve rather than the "perceived" perfectly elastic curve of the PC company.[26] Practically all the variations mentioned above relate to this fact. If there is a downward-sloping demand curve then by necessity there is a distinct marginal revenue curve. The implications of this fact are best made manifest with a linear demand curve. Assume that the inverse demand curve is of the form x = a − by. Then the total revenue curve is TR = ay − by2 and the marginal revenue curve is thus MR = a − 2by. From this several things are evident. First the marginal revenue curve has the same y intercept as the inverse demand curve. Second the slope of the marginal revenue curve is twice that of the inverse demand curve. Third the x intercept of the marginal revenue curve is half that of the inverse demand curve. What is not quite so evident is that the marginal revenue curve is below the inverse demand curve at all points.[26] Since all companies maximise profits by equating MR and MC it must be the case that at the profit-maximizing quantity MR and MC are less than price, which further implies that a monopoly produces less quantity at a higher price than if the market were perfectly competitive.

The fact that a monopoly has a downward-sloping demand curve means that the relationship between total revenue and output for a monopoly is much different than that of competitive companies.[27] Total revenue equals price times quantity.

So the revenue maximizing quantity for the monopoly is 12.5 units and the revenue maximizing price is 25.

A company with a monopoly does not experience price pressure from competitors, although it may experience pricing pressure from potential competition.

A monopolist can extract only one premium, and getting into complementary markets does not pay.

A pure monopoly has the same economic rationality of perfectly competitive companies, i.e. to optimise a profit function given some constraints.

The inverse elasticity rule


Market power is the ability to increase the product's price above marginal cost without losing all customers.[33] Perfectly competitive (PC) companies have zero market power when it comes to setting prices.

Market power is the ability to affect the terms and conditions of exchange so that the price of a product is set by a single company (price is not imposed by the market as in perfect competition).[38][39] Although a monopoly's market power is great it is still limited by the demand side of the market. A monopoly has a negatively sloped demand curve, not a perfectly inelastic curve. Consequently, any price increase will result in the loss of some customers.

Price discrimination


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 is an example of framing to make the process of charging some people higher prices more socially acceptable. Perfect price discrimination would allow the monopolist to charge each customer the exact maximum amount they would be willing to pay. This would allow the monopolist to extract all the consumer surplus of the market. While such perfect price discrimination is a theoretical construct, advances in information technology and micromarketing may bring it closer to the realm of possibility.

It is very important to realize that partial price discrimination can cause some customers who are inappropriately pooled with high price customers to be excluded from the market.

There is important information for one to remember when considering the monopoly model diagram (and its associated conclusions) displayed here.

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.

A company maximizes profit by selling where marginal revenue equals marginal cost.

The purpose of price discrimination is to transfer consumer surplus to the producer.[41] Consumer surplus is the difference between the value of a good to a consumer and the price the consumer must pay in the market to purchase it.[42] Price discrimination is not limited to monopolies.

Market power is a company's ability to increase prices without losing all its customers.

There are three forms of price discrimination.

There are three conditions that must be present for a company to engage in successful price discrimination.

A company must have some degree of market power to practice price discrimination.

A company wishing to practice price discrimination must be able to prevent middlemen or brokers from acquiring the consumer surplus for themselves.

The inability to prevent resale is the largest obstacle to successful price discrimination.[43] Companies have however developed numerous methods to prevent resale.

The three basic forms of price discrimination are first, second and third degree price discrimination.

In second degree price discrimination or quantity discrimination customers are charged different prices based on how much they buy. There is a single price schedule for all consumers but the prices vary depending on the quantity of the good bought.[53] The theory of second degree price discrimination is a consumer is willing to buy only a certain quantity of a good at a given price. Companies know that consumer's willingness to buy decreases as more units are purchased. 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. For example, sell in unit blocks rather than individual units.

In third degree price discrimination or multi-market price discrimination[54] the seller divides the consumers into different groups according to their willingness to pay as measured by their price elasticity of demand. Each group of consumers effectively becomes a separate market with its own demand curve and marginal revenue curve.[44] The firm then attempts to maximize profits in each segment by equating MR and MC,[46][55][56] Generally the company charges a higher price to the group with a more price inelastic demand and a relatively lesser price to the group with a more elastic demand.[57] Examples of third degree price discrimination abound. Airlines charge higher prices to business travelers than to vacation travelers. The reasoning is that the demand curve for a vacation traveler is relatively elastic while the demand curve for a business traveler is relatively inelastic. Any determinant of price elasticity of demand can be used to segment markets. For example, seniors have a more elastic demand for movies than do young adults because they generally have more free time. Thus theaters will offer discount tickets to seniors.[58]

Assume that by a uniform pricing system the monopolist would sell five units at a price of $10 per unit.

Successful price discrimination requires that companies separate consumers according to their willingness to buy.

Monopoly and efficiency


According to the standard model, in which a monopolist sets a single price for all consumers, the monopolist will sell a lesser quantity of goods at a higher price than would companies by perfect competition. Because the monopolist ultimately forgoes transactions with consumers who value the product or service more than its price, monopoly pricing creates a deadweight loss referring to potential gains that went neither to the monopolist nor to consumers. Given the presence of this deadweight loss, the combined surplus (or wealth) for the monopolist and consumers is necessarily less than the total surplus obtained by consumers by perfect competition. Where efficiency is defined by the total gains from trade, the monopoly setting is less efficient than perfect competition.[63]

It is often argued that monopolies tend to become less efficient and less innovative over time, becoming "complacent", because they do not have to be efficient or innovative to compete in the marketplace.

Contrary to common misconception, monopolists do not try to sell items for the highest possible price, nor do they try to maximize profit per unit, but rather they try to maximize total profit.[64]

A natural monopoly is an organization that experiences increasing returns to scale over the relevant range of output and relatively high fixed costs.[65] A natural monopoly occurs where the average cost of production "declines throughout the relevant range of product demand". The relevant range of product demand is where the average cost curve is below the demand curve.[66] When this situation occurs, it is always cheaper 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. 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. Regulation of natural monopolies is problematic. Fragmenting such monopolies is by definition inefficient. The most frequently used methods dealing with natural monopolies are government regulations and public ownership. Government regulation generally consists of regulatory commissions charged with the principal duty of setting prices.[67]

To reduce prices and increase output, regulators often use average cost pricing.

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 law, or implicitly, such as when the requirements of an administrative regulation can only be fulfilled by a single market player, or through some other legal or procedural mechanism, such as patents, trademarks, and copyright.[69]

Monopolist shutdown rule


A monopolist should shut down when price is less than average variable cost for every output level[70]Microeconomics%20and%20Behav]]– in other words where the demand curve is entirely below the average variable cost curve.[70] age variable costs and the monopolists would be better off shutting down in the short term.[70]

Breaking up monopolies


In a free market, monopolies can be ended at any time by new competition, breakaway businesses, or consumers seeking alternatives.

Law


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.[71] 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's price increases.

First it is necessary to determine whether a company is dominant, or whether it behaves "to an appreciable extent independently of its competitors, customers and ultimately of its consumer".

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.[72]Europemballage%20Corpn%20and%20Continental%20Ca]] For example, in the case of [74] case that bananas and other fresh fruit were in the same product market and later on dominance was found because the special features of the banana made it could only be interchangeable with other fresh fruits in a limited extent and other and is only exposed to their competition in a way that is hardly perceptible. 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.[75]

It is necessary to define it because some goods can only be supplied within a narrow area due to technical, practical or legal reasons and this may help to indicate which undertakings impose a competitive constraint on the other undertakings in question.

Market definition may be difficult to measure but is important because if it is defined too broadly, the undertaking may be more likely to be found dominant and if it is defined too narrowly, the less likely that it will be found dominant.

As with collusive conduct, market shares are determined with reference to the particular market in which the company and product in question is sold.

By European Union law, very large market shares raise a presumption that a company is dominant, which may be rebuttable.

When considering whether an undertaking is dominant, it involves a combination of factors.

According to the Guidance, there are three more issues that must be examined.

  • Actual Competitors

Market share may be a valuable source of information regarding the market structure and the market position when it comes to accessing it.

  • Potential Competitors

It concerns with the competition that would come from other undertakings which are not yet operating in the market but will enter it in the future.

  • Countervailing Buyer Power

Competitive Constraints may not always come from actual or potential competitors.

There are three main types of abuses which are exploitative abuse, exclusionary abuse and single market abuse.

  • Exploitative Abuse

It arises when a monopolist has such significant market power that it can restrict its output while increasing the price above the competitive level without losing customers.[76]

  • Exclusionary Abuse

This is most concerned about by the Commissions because it is capable of causing long- term consumer damage and is more likely to prevent the development of competition.[76]

  • Single Market Abuse

It arises when a dominant undertaking carrying out excess pricing which would not only have an exploitative effect but also prevent parallel imports and limits intra- brand competition.[76]

Despite wide agreement that the above constitute abusive practices, there is some debate about whether there needs to be a causal connection between the dominant position of a company and its actual abusive conduct.

Historical monopolies


The term "monopoly" first appears in Aristotle's Politicsοπώλιον).[83][84]

Another early reference to the concept of “monopoly” in a commercial sense appears in tractate Demai of the Mishna (2nd century C.E.), regarding the purchasing of agricultural goods from a dealer who has a monopoly on the produce (chapter 5; 4).[85]

The meaning and understanding of the English word 'monopoly' has changed over the years.[86]

Vending of common salt (sodium chloride) was historically a natural monopoly. Until recently, a combination of strong sunshine and low humidity or an extension of peat marshes was necessary for producing salt from the sea, the most plentiful source. Changing sea levels periodically caused salt "famines" and communities were forced to depend upon those who controlled the scarce inland mines and salt springs, which were often in hostile areas (e.g. the Sahara desert) requiring well-organised security for transport, storage, and distribution.

The Salt Commission was a legal monopoly in China. Formed in 758, the Commission controlled salt production and sales in order to raise tax revenue for the Tang Dynasty.

The "Gabelle" was a notoriously high tax levied upon salt in the Kingdom of France. The much-hated levy had a role in the beginning of the French Revolution, when strict legal controls specified who was allowed to sell and distribute salt. First instituted in 1286, the Gabelle was not permanently abolished until 1945.[87]

Robin Gollan argues in The Coalminers of New South Wales that anti-competitive practices developed in the coal industry of Australia's Newcastle as a result of the business cycle. The monopoly was generated by formal meetings of the local management of coal companies agreeing to fix a minimum price for sale at dock. This collusion was known as "The Vend". The Vend ended and was reformed repeatedly during the late 19th century, ending by recession in the business cycle. "The Vend" was able to maintain its monopoly due to trade union assistance, and material advantages (primarily coal geography). During the early 20th century, as a result of comparable monopolistic practices in the Australian coastal shipping business, the Vend developed as an informal and illegal collusion between the steamship owners and the coal industry, eventually resulting in the High Court case Adelaide Steamship Co. Ltd v. R. & AG.[88]

Standard Oil was an American oil producing, transporting, refining, and marketing company. Established in 1870, it became the largest oil refiner in the world.[89] John D. Rockefeller was a founder, chairman and major shareholder. The company was an innovator in the development of the business trust. The Standard Oil trust streamlined production and logistics, lowered costs, and undercut competitors. "Trust-busting" critics accused Standard Oil of using aggressive pricing to destroy competitors and form a monopoly that threatened consumers. Its controversial history as one of the world's first and largest multinational corporations ended in 1911, when the United States Supreme Court ruled that Standard was an illegal monopoly. The Standard Oil trust was dissolved into 33 smaller companies; two of its surviving "child" companies are ExxonMobil and the Chevron Corporation.

U.S. Steel has been accused of being a monopoly. J. P. Morgan and Elbert H. Gary founded U.S. 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.[90][91] At one time, U.S. Steel was the largest steel producer and largest corporation in the world. In its first full year of operation, U.S. 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,[92] and antitrust prosecution that year failed.

De Beers settled charges of price fixing in the diamond trade in the 2000s. De Beers is well known for its monopoloid practices throughout the 20th century, whereby it used its dominant position to manipulate the international diamond market. The company used several methods to exercise this control over the market. Firstly, it convinced independent producers to join its single channel monopoly, it flooded the market with diamonds similar to those of producers who refused to join the cartel, and lastly, it purchased and stockpiled diamonds produced by other manufacturers in order to control prices through limiting supply.

In 2000, the De Beers business model changed due to factors such as the decision by producers in Russia, Canada and Australia to distribute diamonds outside the De Beers channel, as well as rising awareness of blood diamonds that forced De Beers to "avoid the risk of bad publicity" by limiting sales to its own mined products. 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.

In November 2011 the Oppenheimer family announced its intention to sell the entirety of its 40% stake in De Beers to Anglo American plc thereby increasing Anglo American's ownership of the company to 85%.[30] The transaction was worth £3.2 billion ($5.1 billion) in cash and ended the Oppenheimer dynasty's 80-year ownership of De Beers.

A public utility (or simply "utility") is an organization or company that maintains the infrastructure for a public service or provides a set of services for public consumption. Common examples of utilities are electricity, natural gas, water, sewage, cable television, and telephone. In the United States, public utilities are often natural monopolies because the infrastructure required to produce and deliver a product such as electricity or water is very expensive to build and maintain.[93]

Western Union was criticized as a "price gouging" monopoly in the late 19th century.[94]

American Telephone & Telegraph was a telecommunications giant. AT&T was broken up in 1984.

In the case of Telecom New Zealand, local loop unbundling was enforced by central government.

Telkom is a semi-privatised, part state-owned South African telecommunications company.

Deutsche Telekom is a former state monopoly, still partially state owned. Deutsche Telekom currently monopolizes high-speed VDSL broadband network.[95]

The Long Island Power Authority (LIPA) provided electric service to over 1.1 million customers in Nassau and Suffolk counties of New York, and the Rockaway Peninsula in Queens.

The Comcast Corporation is the largest mass media and communications company in the world by revenue.[96] It is the largest 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 other small towns across the US.

The United Aircraft and Transport Corporation was an aircraft manufacturer holding company that was forced to divest itself of airlines in 1934.

Iarnród Éireann, the Irish Railway authority, is a current monopoly as Ireland does not have the size for more companies.

The Long Island Rail Road (LIRR) was founded in 1834, and since the mid-1800s has provided train service between Long Island and New York City. In the 1870s, LIRR became the sole railroad in that area through a series of acquisitions and consolidations. In 2013, the LIRR's commuter rail system is the busiest commuter railroad in North America, serving nearly 335,000 passengers daily.[97]

Dutch East India Company was created as a legal trading monopoly in 1602. The Vereenigde Oost-Indische Compagnie* enjoyed huge profits from its spice monopoly through most of the 17th century.[98]

The British East India Company was created as a legal trading monopoly in 1600. The East India Company was formed for pursuing trade with the East Indies but ended up trading mainly with the Indian subcontinent, North-West Frontier Province, and Balochistan. The Company traded in basic commodities, which included cotton, silk, indigo dye, salt, saltpetre, tea and opium.

Major League Baseball survived U.S. antitrust litigation in 1922, though its special status is still in dispute as of 2009.

The National Football League survived antitrust lawsuit in the 1960s but was convicted of being an illegal monopoly in the 1980s.

Countering monopolies


According to professor Milton Friedman, laws against monopolies cause more harm than good, but unnecessary monopolies should be countered by removing tariffs and other regulation that upholds monopolies.

However, professor Steve H. Hanke believes that although private monopolies are more efficient than public ones, often by a factor of two, sometimes private natural monopolies, such as local water distribution, should be regulated (not prohibited) by, e.g., price auctions.[102]

Thomas DiLorenzo asserts, however, that during the early days of utility companies where there was little regulation, there were no natural monopolies and there was competition.[103] Only when companies realized that they could gain power through government did monopolies begin to form.

Baten, Bianchi and Moser[104] find historical evidence that monopolies which are protected by patent laws may have adverse effects on the creation of innovation in an economy. They argue that under certain circumstances, compulsory licensing – which allows governments to license patents without the consent of patent-owners – may be effective in promoting invention by increasing the threat of competition in fields with low pre-existing levels of competition.

See also


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