Monopoly: definition and types. What is a natural monopoly?

What is a monopoly? What can it be? What are the differences between its different species?

general information

So, first, let's define what is a monopoly. This is the name of the situation in the economic process or the situation with the presence of a single seller, as a result of which there is no competitiveness (competition) between different suppliers of services and goods.

It should be noted that there are quite a few of its types, depending on the circumstances. The ideal position for a monopolist is a situation in which there are no substitute goods (substitutes). Although in practice they always exist, the whole question is only how effective they are, and whether they can help meet the existing need.

What are the types of monopolies?

Economic science distinguishes such types:

1. Closed monopoly. It provides for limited access to information, resources, licenses, technologies and other important aspects. Sooner or later, its discovery takes place.
2. Natural monopoly. The definition of it is the following: a provision that provides for competition and competition, which causes average costs to reach their minimum when the company serves the entire market. But at the same time, it exists only where, due to various circumstances, it is advantageous to create something only within the framework of one firm, rather than several.
3. Open monopoly. The state of affairs when a company becomes the only provider of a service or product, and this is not affected by any special restrictions in terms of competition. An example is the breakthrough in a certain area by creating a new unique product. You can also use the position with brands.
4. Monopoly of price discrimination. Occurs when different prices are set for different units of the same product. It manifests itself when the buyer is divided into groups.
5. Resource monopoly. Provides for limiting the possibility of using a certain good. The definition of "resource monopoly" is easier to understand, using a small example: there is a need in the forest. But faster than it is grown by leshozes, it will not be possible to get wood. In addition, there is a certain restriction on the territory.
6. Pure monopoly. In this situation, there is only one seller, and in other industries there are no close substitutes. The definition of a pure monopoly provides for a unique product.

Conventionally, all types can be divided into three main classes: natural, economic and administrative. We will now consider them.

Natural monopoly

It arises from the influence of objective causes. In its basis, as a rule, there are specific features of customer service or production technology.

What is a natural monopoly? The definition of this situation would be incomplete without examples. You can meet with her in the sphere of power supply, communication, telephone services and so on. In these industries, a small number of companies are represented (and sometimes it happens that there is only one state enterprise). And due to this, they occupy a monopoly position in the country's market. For example, the exploration of outer space. Fifty years ago, only states could do this for a variety of reasons. But now there is already one private company that offers its services.

Administrative (state) monopoly

It appears as a result of the influence of the authorities. So, it can be expressed in the fact that individual companies are granted an exclusive right to carry out a particular type of activity. As an example, one can also cite the organizational structures of state enterprises, which are united and subordinate to various associations, ministries, or headquarters.

This approach is used, as a rule, to unite within the same industry. In the market, they act as one economic entity, which implies the absence of competition. An example is the former Soviet Union. That's what a state monopoly is. The definition does not provide for such a situation on the territory of the whole country.

Take, for example, the military industry. It is necessary to make sure that it is ready for any troubles and surprises. And if it is transferred to private hands, then the military industry can be caused the greatest harm. And this can not be allowed in any case. Therefore, it is under state control.

Economic monopoly

This is the most common class. If we consider what this monopoly is, the definition of history, the development trends of society, we should note this feature: compliance with the laws of the economic sector. The central object in this case is the entrepreneur. He can get a monopoly position in two ways:

1. To successfully develop the enterprise, constantly increasing its scale by means of concentration of capital.
2. Unite with other people on a voluntary basis (or while absorbing bankrupts).

Over time, such a scale is reached that we can talk about dominance in the market.

How does a monopoly arise?

Modern economic science distinguishes three main ways of this process:

1. The conquest of the market by a separate enterprise.
2. Conclusion of an agreement.
3. Use of product differentiation.

The first way is very difficult. Confirmation of this is the fact of the exclusivity of such formations. But at the same time it is considered the most decent due to the fact that the conquest of the market occurs on the basis of effective activity and gaining a competitive advantage over other enterprises.

More common is the agreement between several large firms. By means of it, a situation is created in which producers (or sellers) act as a "united front". In this case, competition is reduced to nothing. And, first of all, the price aspect of interaction is at sight.

The natural result of all this - the buyer falls into non-alternative conditions. It is believed that for the first time such situations began to arise by the end of the nineteenth century. Although it is fair to note that such monopolistic tendencies began to appear even in times of extreme antiquity. But the latest history of this phenomenon originates from the economic crisis of 1893.

Negative influence

Monopoly is often perceived in a negative way. Why is that? This largely explains the correlation between crises and monopolies. How's it going? There are two options:

1. Monopoly was established during the crisis by several enterprises to stay afloat. In this case, it is easier for them to survive difficult times.
2. The monopoly enterprise created the conditions for the crisis to drive small players out of the market and take their share of the market to themselves.

In both cases, monopolies are large structures, with a significant number of products. Due to their dominant position in the market, they can influence the pricing process, achieving profitable prices for themselves and gaining significant profits.

It should be noted that the monopoly position is the desire and dream of every enterprise and company. Thanks to this, you can get rid of a large number of risks and problems that are borne by competition. In addition, they then occupy a privileged position in the market and concentrate economic power in their hands. And this is already opening the way for imposing its terms on counteragents and even on society.

Specificity of monopolies

Attention should also be paid to a certain specificity in economic science, which studies this influence. It should be noted that this is not a mathematics, and here a lot of terms can have a different interpretation, and some can not be recognized in separate textbooks / collectives.

Let's consider an example. At the beginning of the article the definition of pure monopoly was mentioned, but this does not mean that everything is exactly so. It is quite possible to meet information on the availability of additional aspects or a slightly different interpretation of the term. This does not mean that one of them is wrong. There is simply no concept at the state / international level. And as a result, there are different interpretations.

The same could be said if we considered an artificial monopoly. The definition of this term could be given: the situation when such conditions are created for an individual enterprise, that it affects the entire market. It's right? Certainly! But if you say that an artificial monopoly is the concentration of resources, production and marketing in one hand through a cartel or trust, then this is also true!

Conclusion

So the definition of the word "monopoly" was given. It should be noted that this is a very extensive and interesting topic. But the size of the article is limited. One could also talk about the practical features of the monopolies in various parts of the world, consider the situation in the territory of the countries of the former USSR, learn what and how in Western Europe and the United States. There is a great deal of material on this topic. As they say, who is looking for, he will find.