Monopoly is the exact opposite of a competitive market. It is characterized by the presence of only one seller and manufacturer, which occupies all the space in the market for a particular product or service. The opposite is monopsony, where only the buyer in the market for a particular product or service has power.
A perfect monopoly is such market conditions under which a product produced by a monopolist is unique and has no substitute goods, it is impossible to enter the market for a number of circumstances, as a result of which the producer holds all the power in its hands. In addition, the monopolist can significantly influence the setting of prices, but in this case, its power is still limited.
Profit in such a market is very high. That is why more and more outsiders are attracted to the industry, but how do monopolists struggle with such fierce competition? How do they manage to restrain this onslaught and continue to dominate? To do this, consider the types of monopolies :
1. Natural. It arises mainly in industries that provide society with vital resources, such as electricity, water, gas, transportation (for example, urban transport), etc.
In this case, supplying the market with the necessary resources is cheaper, therefore, production becomes more efficient.
There is a register of natural monopolies, which collects uniform information about the involved business entities.
2. Monopoly in conditions of organization control over rare natural resources or knowledge. If a company possesses special resources (oil, for example) or knowledge (patents), then it can dominate the market due to the fact that it is their sole owner.
3. A state monopoly is a market situation that is caused by a natural monopoly (for example, rail transportation). This is also a circumstance resulting from the fact that the influx of other organizations of a non-state type into a industry is prohibited (for example, in the field of export, import).
4. Bilateral monopoly is a situation in the market when a monopsonist buyer opposes a monopoly producer (for example, when a monopolist provides a service to the state - the only buyer of this type of service).
There is such a thing as monopolistic competition. It is a type of market structure in which a significant number of sellers or manufacturers supply the market with similar, but not exactly the same products, which are distinguished by quality, design or some other characteristics. Goods that are produced under conditions of monopolistic competition make up one industry and one market (for example, toothpastes, sportswear, non-alcoholic products).
Thus, a monopoly is a state in which power belongs to one seller or producer. But if there are many buyers, this situation in the market is deplorable. Often, a monopolist reduces output and raises product prices.