What is a Monopoly:

A firm is considered a monopoly(our trust) if, it is the sole producer of a product or services which does not have close substitutes. This domination of the industry allows the monopoly to have some ability to influence the market price of its product. Examples of this would be Microsoft the sole producer of Windows OS. A “Pure Monopoly exists when a single firm is the only producer or seller of a product that has no close substitute”.

How monopolies form:

A monopoly forms when there are barriers to enter into that market. These barriers included when a monopolist owns key resources required to produce the good.

Barriers to enter:

Legal barriers to entering a market include patents and copyright restrictions on the good.

Statutory or government appointed contractors.

Trading agreements and control over outlets, the monopoly has control over distribution of the good in the market.

there may be high setup costs to enter the market for a new enterprise, which would be a massive deterrent for competition to enter the market this also relates to large economies of scale.

In some cases the monopoly has strong brand loyalty and people are unwilling to change to another provider of that good even if it is cheaper.

Disadvantages of Monopolized Industries:

1. In a monopolized industry the Customers have no options when they wish to Acquire the good or service.
2. the value of the product is based on the needs and wants of the organisation not the customer, the monopoly does not need to be competitive in their prices.
3. The quality of the good or service may not be of good standard, customers end-up paying higher prices for goods of lower quality.
4. the barriers of entry will result in competition which was successful in entering the market, being squeezed out of the market.
5. Monopolized markets may not be resuress efficient, the company may have “fat” which make them more costly than needed.
6. the monopoly may not always do things in the interests of the customer, community or environment.
7. Monopolies main goals is to earn super normal profit in the short and long run, benefiting shareholders not the customer.

Government Monopolies:

these are state run monopolies, providing a service which is either non-profitable or loss making. a state monopolies main focus is not to make profit but to breakeven. but in recent times in ireland governments have encouraged monopolization or state monopolies becoming profit driven. this is evident in the de-monopolization of the energy sector in ireland and the selling of of non-profitable assets in state run monopolies.

Private enterprise Monopolies:

These are illegal in western markets but can still exist because of state monopolies privatising, or large cost for others to enter the market. even if they do exist they are find and limited through regulations.  

the main focus of a private monopoly is to maximise on profit, they are more efficient that state run monopolies. there main goal is to satisfy the shareholders, have very little interest in the community they operate near or the environment.

Duopoly:

this is where there are only two companies providing a good or service. this is also known as a Imperfect competition, this includes industries in which firms have competitors but do not face so much competition that they are price takers

Oligopoly:

Oligopoly is a market structure where there are a few sellers anywhere between 3 and 7  of a product or a service. example of this in ireland is the Market for Mobile Phone Services where there is only 5 players in the industry.

Imperfect competition price control:

Observed phenomenon in an Oligopoly that prices rarely change. If one Oligopolist raises prices and no one else will raise prices and that Oligopolist loses market share. If one Oligopolist cuts prices, ALL will follow, so everyone loses out. So no one cuts prices or raises prices.
Example Prices rarely change. Oligopolists never compete on prices. Only compete in the product offering.

Cartel:

this is when all parties in  Duopoly or Oligopoly agree to shadow each other’s prices with little difference between them. this is any-competitive and is illegal in all western markets.

examples of carlets include the mexican criminal families, which don't compete with one and another for land.