What is a monopoly?

We speak of a monopoly, when in a market there is only one seller or producer to satisfy the needs of all purchasers. It comes from the Greek "monos", one and "polein", to sell. That is, a single seller. The characteristic of this situation is that, since there is only one seller, this gives it a privileged position that it can take advantage of in different ways. As is the case by setting higher prices, or by controlling the quantity produced. In this way, a scarce product can be sold at a higher price.

Monopoly characteristics

Sometimes monopoly is natural. That is, it is produced by the very characteristics of the product or service that is sold. For example, in the case that its exploitation is only profitable when the Scale economy. Or when the monopoly situation occurs due to the fact that there is no type of rival with respect to the product or service in question, for example, because there is no type of substitute product or service, we find ourselves with a pure monopoly. However, it is difficult for this situation to occur in reality.

Monopolies have usually been promoted by states, and are usually run by public companies. However, at present, there is a trend against monopoly and in favor of free competition. Therefore, anti-trust or anti-cartel regulations are established, and even some regulations that prevent the merger of companies determined by reason of the volume of market share they represent.

In the opposite situation to monopoly is monopsony, which implies the existence of a single buyer for multiple sellers in the market. They are causes that can give rise to monopoly, both the existence of a license, such as the exclusivity of a certain technology or absolute control over a resource.

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