No, we aren’t talking about the board game that many of you have played since childhood. We are considering the concept of “monopoly” as noted in subjects of economics or business, the kind of monopoly referenced in history classes when discussing John D. Rockefeller or Andrew Carnegie.
A monopoly is a market scenario in which a single company dominates its marketplace or sector, being the sole company that exists. This usually happens in the presence of free market capitalism. For example, Amazon is the dominant force of the e-commerce space, in which they have a level of influence, size, and control allowing them to, at times, dominate a multitude of sectors. Monopolies occur when there are few restraints or barriers in a market because this makes it easier for companies to progress and reach a larger market size.
Common characteristics can help to identify whether or not a market is a monopoly. Some of these characteristics include multiple barriers of entry or high level barriers that make entrance into a new market extremely difficult for new companies. Another identifiable characteristic of monopolies concerns the number of players within a market. If there is one sole player involved in selling goods or services, that seller is then usually the price maker in that market indicating a monopolistic model.
The last sign deals with the principle of economies of scale. As a monopoly grows, they are able to produce goods at a much lower cost and thus, are able to lower prices beyond those of any potential competitors. This strategy is known as predatory pricing. You can see how it becomes very interconnected and a monopolistic cycle that begins once things get into motion.
Historically, governments have sought to regulate monopolies using antitrust laws because these companies often compromise the interest of the consumer. Due to their dominance in an industry, monopolies are in a position where they have the ability to lessen the quality of their product service. Antitrust laws are meant to prevent excessive monopolization of industries by breaking up companies and protecting consumers from unethical business practices. At times, however, the government struggles to implement these regulations.
