The term monopoly refers to a market structure in which there is only one seller, barriers to entry for other firms are very high hence they cannot enter the market, there are no close substitutes in the market for the product and the firm operating in the market has complete control over the prices. There are two types of monopolies, legal monopoly and a natural monopoly. A legal restriction imposed on entry of a new firm is called a legal monopoly. This type of monopoly is practiced by granting a monopoly franchise for example Australia Post, by a government license or through patents and copyrights. Whereas natural monopoly is one firm serving the entire market at a lower price. Some national examples of monopoly are the supply of water and gas, Australia Post, BHP Billiton and …show more content…
Some characteristics of monopolistic competition are that all the firms make independent decisions regarding the price and output. The products of all the firms are differentiated which means similar but not identical, hence they are not substitutes, there are no barriers to enter or leave the market and there are a large number of firms. They key to operate in such a market is through differentiation. This can be done in a number of ways discussed here under: • Physical product differentiation, where firms use size, design, color, shape, performance, and features to make their products different. For example, consumer electronics can easily be physically differentiated. • Marketing differentiation, where firms try to differentiate their product by distinctive packaging and other promotional techniques. For example, breakfast cereals can easily be differentiated through packaging. • Human capital differentiation, where the firm creates differences through the skill of its employees, the level of training received, distinctive uniforms, and so
When the word monopoly is spoken most immediately think of the board game made by Parker Brothers in which each player attempts to purchase all of the property and utilities that are available on the board and drive other players into bankruptcy. Clearly the association between the board game and the definition of the term are literal. The term monopoly is defined as "exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices" (Dictionary.com, 2008). Monopolies were quite common in the early days when businesses had no guidelines whatsoever. When the U.S. Supreme Court stepped into break up the Standard Oil business in the late 1800’s and enacted the Sherman Antitrust Act of 1890 (Wikipedia 2001), it set forth precedent for many cases to be brought up against it for years to come.
An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies. Although firms in oligopolies have competitors, they do not face so much competition that they are price takers (as in perfect competition). Hence, they retain substantial control over the price they charge for their goods (characteristic of monopolies).
Differentiation – where companies introduce a unique dimension that is considered to be important to the market. Some LCCs have moved onto this strategy.
Adopting a strategy of differentiation makes firms provide products and services what are distinct in some way valued by customers.
In a monopolistic competitive market the product of different sellers are discerned on the basis of brands. Here the product differentiation given rise to an element of monopoly to the producer over the competing product. As such the producer of the competing brand could increase the price of the product knowingly well that the brand loyal customers are not going to leave them. This is possible as here the products have no effective substitutes. How ever since all the brands are of close substitutes to one another the seller would lose some of their customers to these competitors. In the past many companies have faced the trouble of having a bag full of customers and due to close-fitting .competitors they end up only having a few. Most entrepreneurs fell that fronting their competitors is the toughest part of running a business in a monopoly market. Thus the monopolistic competitive market is a mixture projecting out both monopoly and perfect competition.
Differentiation through distribution, including distribution via mail order or through internet shopping. For example u can buy Monster from Amazon.com.
Differentiation through marketing strategies, this is a form of innovation driven by the need to create a superior brand (Sadler, 2003).
At the beginning, a clear understanding of the word monopoly should be established before diving into the different aspects of monopoly. Therefore, here is the definition of monopoly according to invetopedia, “a monopoly is a situation in which a single company or group owns all or nearly all of the market for a given product or service.” (Investopedia, 2016)
In the modern world of conducting business, any company that wishes to succeed must differentiate its products or services from others in the industry. Differentiation makes it possible for consumers to point out notable differences between one company’s products as compared to those of competitors. Differentiation helps companies build brand loyalty as the uniqueness keeps customers fixed on a particular product. BMW is one of the most popular automakers in the world today. It definitely uses differentiation as a strategy to beat off competition by building products that are innovative, detailed and incomparable to those of competitors.
There are many industries. Economist group them into four market models: 1) pure competition which involves a very large number of firms producing a standardized producer. New firms may enter very easily. 2) Pure monopoly is a market structure in which one firm is the sole seller a product or service like a local electric company. Entry of additional firms is blocked so that one firm is the industry. 3)Monopolistic competition is characterized by a relatively large number of sellers producing differentiated product. 4)Oligopoly involves only a few sellers; this “fewness” means that each firm is affected by the decisions of rival and must take these decisions into account in determining its own price and output. Pure competition assumes that firms and resources are mobile among different kinds of industries.
A monopoly is an industry in which there is only one organisation that supplies a particular good, service or resource which has no other similar alternatives. Monopolies are created by barriers which restrict the entry of new organisations (McTaggart et al, 1999). In a perfect monopoly, the seller has total control over the quantity of goods or services available for sale and the price at which the items are sold (Butterworths Business .. Dictionary, 1997). De Beers Consolidated Mines Central Selling Organisation has had a monopoly on the selling of rough diamonds since the 1930’s.
There are four major market structures; perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect competition is the market structure in which there are many sellers and buyers, firms produce a homogeneous product, and there is free entry into and exit out of the industry (Amacher & Pate, 2013). A perfect competition is characterized by the fact that homogeneous products are being created. With this being the case consumers have no tendency to buy one product over the other, because they are all the same. Perfect competitions are also set up so that there is companies are free to enter and leave a market as they choose. They are allowed to do with without any type of restriction, from either the government or the other companies. This structure is purely theoretical, and represents and extreme end of the market structure. The opposite end of the market structure from perfect competition is monopoly.
Price competition among rivals is close to nil, industry participants are very competitive when it comes to product differentiation. Product offerings to satisfy consumer demands include a variety of coffee, juices, muffins, bagels, cookies, cream cheese sandwiches, soups and other miscellaneous items.
Monopoly A monopoly is a situation where a company owns all or nearly the market for providing the services/ product. A market situation where one producer (or a group of producer performing in concert) controls supply of goods and service, and where the entry of new producer is not permitted or highly limited. Monopoly free to set the prices of the products if the government intervention is absence. Some it is considered bad thing even when it leads to a fair share of business opportunities amongst competitors.
Well the bottom line is that a monopoly is firm that sells almost all the goods or services in a select market. Therefore, without regulations, a company would be able to manipulate the price of their products, because of a lack of competition (Principle of Microeconomics, 2016). Furthermore, if a single company controls the entire market, then there are numerous barriers to entry that discourage competition from entering into it. To truly understand the hold a monopoly firm has on the market; compare the demand curves between a Perfect Competitor and Monopolist firm in Figure