13 december 2024

Monopoly The History Behind The Property Board Game

write the meaning of monopoly

A sense of familiarity that generates consequently deters them from going elsewhere to satisfy their demand. Hence, they find it difficult to capture market share for the product and service that they offer. Strategic Pricing allows a monopolist to charge any price for their offerings. The price may be set to be extremely low – predatory pricing – in order to prevent any firm from entering the market.

A monopoly that tends to defraud the customer through extremely high prices and inferior quality goods is considered to be illegal. Therefore, such monopolies are discouraged and dissolved by government intervention. However, companies operating in sectors like oil, gas, water, electricity, etc., are government-owned monopolies.

This is the major reason a monopolist firm wants to continue enjoying its monopoly. Monopoly is derived from the words “monos” (single) and “polein” (to sell) of Greek. Monopoly was first depicted in The Landlord’s Game, which was invented by Elizabeth Magie Phillips (or Lizzie Magie) in 1904. This game inspired the monopoly board game that is played by most students today. Antitrust cases can be brought against companies who violate antitrust laws and prosecuted by state or federal governments.

Foreign trade

This is often done by a monopolist to demonstrate power and pressurise potential and existing rivals. Due to this phenomenon, the output generated by a monopolist is large, with lesser input cost. In case a new firm tries to enter, the cost of production would be higher than that of the monopolist and the output generated would be lower than the monopolist. It is, hence, evident that the new entrant would be at a disadvantage in terms of production costs. Hence, the monopolist gains a cost advantage.This inevitable disadvantage deters potential entrants and so, economies of scale poses as a barrier to entry. A natural monopoly develops from reliance on unique raw materials, technology, or specialization.

  1. These are costs that are essential for the firm, like advertising costs, but cannot be recovered.
  2. Industries vary with respect to the ease with which new sellers can enter them.
  3. This firm faces no competition due to which it can set its own prices, thereby exercising full control over the market.
  4. The Herfindahl-Hirschman index indicates the competition or the market concentration of an industry.
  5. The first thing to consider is market definition, which is one of the crucial factors of the test.79 This includes the relevant product market and the relevant geographic market.
  6. This will sort matters for the company (Google) and address the concerns of the regulator (CMA).

Microsoft Corporation was the first company to hold a pure monopoly position on personal computer operating systems. As of May 2024, its desktop Windows software still held a market share of more than 73%. De Beers’ market share by value fell from as high as 90% in the write the meaning of monopoly 1980s to less than 40% in 2012, having resulted in a more fragmented diamond market with more transparency and greater liquidity. Formed in 758, the commission controlled salt production and sales in order to raise tax revenue for the Tang dynasty.

Relevant geographic market

A monopoly is a market where one firm (or manufacturer) is the sole supplier of certain goods or services. This firm faces no competition due to which it can set its own prices, thereby exercising full control over the market. The monopolist aims to generate high profits by selling products (or services) that do not have close substitutes. Monopoly and competition, basic factors in the structure of economic markets.

  1. Due to this, these scarce but essential resources are made unavailable to the potential entrants.
  2. Price fixing is an agreement among competitors to raise, lower, maintain, or stabilize prices or price levels.
  3. Monopoly and competition, basic factors in the structure of economic markets.
  4. Due to this phenomenon, the output generated by a monopolist is large, with lesser input cost.
  5. There exists no competition in such industries as there are virtually no other players.
  6. Another related word is monopsony, used for a more extreme oligopsony in which there is only a single buyer.

Advantages and Disadvantages of Monopolies

The Herfindahl-Hirschman index indicates the competition or the market concentration of an industry. It is obtained by squaring the size of the different firms in the industry and summing the resulting numbers. Lower HHI indicates more competition, while a higher one indicates less or no competition (i.e., monopoly). The concentration ratio indicates the extent of competition prevalent in an industry. Zero implies the existence of a large number of firms (high competition) and one implies the absence of competitors (no competition or a monopoly).

We spend a lot of time researching and writing our articles and strive to provide accurate, up-to-date content. However, our research is meant to aid your own, and we are not acting as licensed professionals. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions.

write the meaning of monopoly

To reduce prices and increase output, regulators often use average cost pricing. By average cost pricing, the price and quantity are determined by the intersection of the average cost curve and the demand curve.74 This pricing scheme eliminates any positive economic profits since price equals average cost. Regulation of this type has not been limited to natural monopolies.74 Average-cost pricing does also have some disadvantages. Industries vary with respect to the ease with which new sellers can enter them. The barriers to entry consist of the advantages that sellers already established in an industry have over the potential entrant.

Companies with patents or extensive research and development costs, like pharmaceutical companies, are considered natural monopolies. Businesses love the idea of a free-market economy, so why then, would a business want to become a monopolist? Just think…if a business can control the entire market for a product, then they eliminate competition and are almost guaranteed a profit. In this section, you’ll learn about what a monopoly is and why firms try to eliminate their competition. A pure monopoly is the rarest form wherein the product (or service) being sold has no close substitutes.

Victorian London Goes Board Game Crazy!

A monopoly is an economic market structure where a specific person or enterprise is the only supplier of a particular good. Antitrust legislation is in place to restrict monopolies, ensuring that one business or group of businesses cannot control a market and use that control to exploit consumers. After controlling the nation’s telephone service for decades as a government-supported monopoly, AT&T fell to antitrust laws. The boundaries of what constitutes a market and what does not are relevant distinctions to make in economic analysis. In a general equilibrium context, a good is a specific concept including geographical and time-related characteristics. Most studies of market structure relax a little their definition of a good, allowing for more flexibility in the identification of substitute goods.

write the meaning of monopoly

Yes, during World War II, Waddington’s produced special editions of Monopoly containing hidden escape materials for Allied prisoners of war, including maps concealed within the board and real currency hidden beneath Monopoly money. Right now, passionate collectors and dedicated museums are treating Monopoly sets like precious treasures! From those secret wartime editions to Charles Darrow’s hand-drawn original, they’re making sure these amazing pieces of history stick around for future players to discover. Picture Victor Watson and his secretary Marjory Phillips, armed with notepads and determination, wandering through London’s maze of 45,687 streets to handpick just 22 special locations. Public monopolies are created when the government nationalizes certain industries to serve the interest of the people.

This is an example of framing to make the process of charging some people higher prices more socially acceptable.citation needed Perfect price discrimination would allow the monopolist to charge each customer the exact maximum amount they would be willing to pay. This would allow the monopolist to extract all the consumer surplus of the market. A domestic example would be the cost of airplane flights in relation to their takeoff time; the closer they are to flight, the higher the plane tickets will cost, discriminating against late planners and often business flyers. While such perfect price discrimination is a theoretical construct, advances in information technology and micromarketing may bring it closer to the realm of possibility.

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