MONOPOLY

BY
AYANTI
ADE
CAVIN
ASHIM
RAHIM
 INTRO

•M A R K E T I S A N I N S T I T U T I O N T H A T R U N S T H E A C T I V I T Y O F
BUYING AND SELLING GOODS AND SERVICES

•T H E R E I S C E R T A I N M A R K E T C H A R A C T E R I S T I C W H E R E I N
THAT MARKET THERE IS ONLY ONE SELLER OF ONE
PRODUCT (GOODS OR SERVICE) THAT HAS NO
ALTERNATIVE SUBSTITUTE PRODUCT (SUBSTITUTION)

•M A R K E T W I T H T H E S E C H A R A C T E R I S T I C S I S C A L L E D
MONOPOLY MARKET
 INTRO
•I N A F A C T U A L E C O N O M I C L I F E , I T I S R A R E T O G E T
SELLERS WHO DO NOT FACE COMPETITION FROM OTHER
SELLERS

•M O N O P O L Y M A R K E T I S O F T E N I N T E R P R E T E D N E G A T I V E L Y
IN SOME PEOPLE WHO LACK UNDERSTANDING OF
ECONOMICS

•T H E R E A R E A L S O S O M E M O N O P O L I E S T H A T A I M S T O
AVOID MONOPOLISTIC PRACTICES THAT HARM THE
GENERAL PUBLIC
 DEFINITION

•M O N O P O L Y ( F R O M G R E E K : M O N O S , O N E + P O L E I N , S E L L )
IS A FORM OF MARKET IN WHICH THERE IS ONLY ONE
SELLER WHO DOMINATES THE MARKET.

•T H E P R I C E D E T E R M I N A N T I N T H I S M A R K E T I S A S E L L E R
OR OFTEN REFERRED TO AS A "MONOPOLIST“

•A S A P R I C E - M A K E R , A M O N O P O L I S T C A N I N C R E A S E O R
DECREASE PRICES BY DETERMINING THE QUANTITY OF
GOODS TO BE PRODUCED
 Monopoly Characteristic
•T H E N U M B E R O F S E L L E R S I S O N L Y O N E , A N D T H E S E L L E R
HAS A SUBSTANTIAL MARKET SHARE

•D O E S N O T H A V E S I M I L A R R E P L A C E M E N T I T E M S .

•T H E R E I S A N O B S T A C L E F O R O T H E R C O M P A N I E S T O E N T E R
INTO THE MONOPOLY MARKET.

•M A Y A F F E C T P R I C I N G .

•L E S S A D P R O M O T I O N R E Q U I R E D .
 Types of Monopoly

•N A T U R A L M O N O P O L Y

A NATURAL MONOPOLY IS A TYPE OF MONOPOLY THAT EXISTS

DUE TO THE HIGH FIXED OR START-UP COSTS OF CONDUCTING A
BUSINESS IN A SPECIFIC INDUSTRY

•M O N O P O L Y B Y L A W O R L E G A L M O N O P O L Y

A LEGAL MONOPOLY IS A COMPANY THAT IS OPERATING AS A

MONOPOLY UNDER A GOVERNMENT MANDATE
 Conclusion
•E C O N O M I C R E P E R C U S S I O N S
S O M EARGUE THAT MONOPOLIES ARE BENEFICIAL BECAUSE
HIGHLY-PROFITABLE COMPANIES TEND TO PUMP MORE FUNDS
INTO RESEARCH AND DEVELOPMENT. BECAUSE THE MONOPOLY
IS IN A DOMINANT POSITION, IT CAN COMFORTABLY BEAR THE
RISKS ASSOCIATED WITH INNOVATION.

H O W E V E R , A H I G H L Y - P R O F I T A B L E M O N O P O L Y A L S O M A Y H A V E
LITTLE INCENTIVE FOR IMPROVEMENT AS LONG AS CONSUMERS
STILL DEMONSTRATE A NEED FOR THEIR CURRENT PRODUCT OR
SERVICE
 Conclusion
•D I S M A N T L I N G A M O N O P O L Y

O N E O P T I O N F O R P O L I C Y M A K E R S W O U L D B E T O D I S M A N T L E
THE MONOPOLY. THIS CAN BE ACCOMPLISHED BY SPLITTING
THE MONOPOLY INTO TWO COMPANIES, DIVIDE THEIR BUNDLED
PRODUCTS OR SERVICES, OR SEPARATING SERVICES INTO
SMALLER COMPETING REGIONAL SERVICES.
 Conclusion
•L O W E R I N G P R I C E S

A N O T H E R O P T I O N F O R P O L I C Y M A K E R S W O U L D B E T O F O C U S
ON LOWERING PRICES INSTEAD OF BREAKING APART A
MONOPOLY.
 References
•Á G O S T O N , K . C . ( 2 0 1 5 ) P R I C I N G O F A R I S K A V E R S E M O N O P O L Y I N T H E
PRESENCEOF STOCHASTIC DEMAND.THEORETICAL ECONOMICS
LETTERS, 5, 217-224.

•H O S O Y A ,
Y. AND KANEKO, S. (2015) WELFARE IMPROVEMENT AND
THE EXTENSIONOF THE INCOME GAP UNDERMONOPOLY.
THEORETICAL ECONOMICS LETTERS, 5, 590-597

•K I R S A N O V S , S A F O N O V E , R A M I R E Z S ( 2 0 1 7 ) N A T U R A L M O N O P O L Y I N
RUSSIA : STATE REGULATION PROBLEMS. BALTIC JOURNAL OF REAL
ESTATE ECONOMICS AND CONSTRUCTION MANAGEMENT, 137-145.

•W A N G , Y . A N D T A N , D . Q . ( 2 0 1 7 ) T H E I N F L U E N C E O F P R O D U C T M A R K E T
EXTERNALITY ON DYNAMIC DECISIONS OF MONOPOLY.MODERN
ECONOMY, 8, 806-815.