What Is Monopoly Market Structure

i. Monopoly Market Structure

Monopoly in most of the cases is characterized by single seller. The one in monopoly has no close substitutes. For example in case of Bangladesh Electricity supply is monopolized, which has no substitute. The public have to depend and buy the product (electricity) from single centralized seller (government). The one in monopoly is the price maker. The price of the commodity is decided by the monopolist. However the general perception is that the marginal revenue is equal to the marginal cost.

Barrier to entry is there in case of monopoly. The new entrant in the market is either not allowed or the entry of new entrant is made difficult or almost impossible. The entry to the new entrant is restricted either by economies

These are water supply, Railways, Infrastructure, Electricity supply etc. The example of monopolistic competition market structure in the context of Bangladesh, the best example is that of banking industry. The characteristics of both the market structures discussed above can be related to the two industries of Bangladesh. Firstly railway in Bangladesh has the monopoly in the market because of the support of the government. Thus there is single seller in the market for the services. Secondly the price maker for the railways is the government. Thus the government decides what the prices are to be set. Railways have their own segment in the transportation thus it does not have any close substitutes when the prices and facilities are to be considered. Thus the railways are not having any close substitutes. Lastly the entry is restricted. There can be no competition to the railways in Bangladesh. The new entrants are not allowed. This is because if the government loses control over this segment the public might be exploited. Thus to protect the public from increased burden of fares the government has maintained monopoly of railways by having full control over it and not allowing new entrants in the

The banking sector in Bangladesh suffers due to high Interest Rate Spread. This puts pressure on the banking industry to increase the profits because of higher interest rate spread. In the financial and economic environment of Bangladesh this could not be possible, thus resulting in reduced competitive nature of the market. This is one of the characteristic of the monopolistic competition (MonzurHossain, 2010).

Secondly the banking industry of the Bangladesh I quite open and offer little barriers to entry. The foreign banks are also allowed to operate with the advantage that in their base country the interest rate spread is on the lower side.

It has been argued that the steps should be taken to improve the competition in the market but the steps have not been fruitful looking at the market structure wherein the banking facilities will have to be provided to the masse that will be dependent on the