Tag: monopolies

A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity. This contrasts with a monopsony which relates to a single entity’s control of a market to purchase a good or service, and with oligopoly which consists of a few sellers dominating a market. The verb monopolise or monopolize refers to the process by which a company gains the ability to raise prices or exclude competitors.In law, a monopoly is a business entity that has significant market power, that is, the power to charge overly high prices. Although monopolies may be big businesses, size is not a characteristic of a monopoly.

A monopoly is distinguished from a monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market.

Monopolies, monopsonies and oligopolies are all situations in which one or a few entities have market power and therefore interact with their customers , or suppliers in ways that distort the market.

Holding a dominant position or a monopoly in a market is often not illegal in itself, however certain categories of behavior can be considered abusive and therefore incur legal sanctions when business is dominant. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic interest group.

Monopolies may be naturally occurring due to limited competition because the industry is resource intensive and requires substantial costs to operate.