by Tarot

Created on: January 23, 2009

A monopoly describes the situation were a single corporation or government agency is in a position to dominate a market to the point were their is no real competition.

The best examples were the privatised industries of the British economy which up until the late 70's dominated British industry. These corporations were owned by the government had no competition within their market in the UK either because government legislation made it impossible for others to enter the market, because their was no space left in the market or because they received such large subsidies from the tax payer that no one else could compete with them.

Other examples of monopolies have emerged due to a single corporation or a small group of corporations gaining such a large share of a market that they are able to dominate it by driving their competitors out of the market place, of course their are strict laws on price fixing to prevent corporations working together to undercut their competitors but it can still happen without any "official" cooperation. This may occur because a single corporation gains a competitive advantage over their opponents which puts them in a dominant position from which they can expand to drive out competition using legal methods, as was the case with IBM. It may occur through less legal methods, such as the rise of many industries in Germany in the 30's backed by mob violence against their competitors. I have already stated how it might occur by a number of businesses cooperating to lower market prices to a level that they can survive for a time but their competitors cant.

Most countrys in the western world have government units whos job is to prevent monopolys from occuring, typrically their job is to investigate allegations of price fixing and to improve the mergers of large corporations which once merged might be able to dominate teh market place. The reason these agencies exist is because of what corporations tend to do when they gain a monopoly, typically they raise prices and may also lower the quality of their products. In a monopoly situation you have no competition so the customers have no choice but to buy your products, assuming they need those products or services then you have no incentive to improve those products or services and you have the freedom to charge the maximum price that Your customers can afford to pay.

In simple terms a monopoly is a siutation in which their is no competition in a market and customers have no choice!

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