Monopoly

A monopoly (from Greek μόνος mónos ["alone" or "single"] and πωλεῖν pōleîn ["to sell"]) exists when a specific person or enterprise is the only supplier of a particular commodity. This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few sellers dominating a market.[2] Monopolies are thus characterized by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller's marginal cost that leads to a high monopoly profit.[3] The verb monopolise or monopolize refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge overly high prices.[4] Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).[4]

A monopoly is distinguished from a monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations in which one or a few entities have market power and therefore interact with their customers (monopoly or oligopoly), or suppliers (monopsony) in ways that distort the market.

Monopolies can be established by a government, form naturally, or form by integration.

In many jurisdictions, competition laws restrict monopolies. Holding a dominant position or a monopoly in a market is often not illegal in itself, however certain categories of behavior can be considered abusive and therefore incur legal sanctions when business is dominant. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic interest group. Patents, copyrights, and trademarks are sometimes used as examples of government-granted monopolies. The government may also reserve the venture for itself, thus forming a government monopoly.

Monopolies may be naturally occurring due to limited competition because the industry is resource intensive and requires substantial costs to operate.

I Like a Little Competition
"I Like a Little Competition"—J. P. Morgan by Art Young. Cartoon relating to the answer J. P. Morgan gave when asked whether he disliked competition at the Pujo Committee.[1]

Market structures

In economics, the idea of monopoly is important in the study of management structures, which directly concerns normative aspects of economic competition, and provides the basis for topics such as industrial organization and economics of regulation. There are four basic types of market structures in traditional economic analysis: perfect competition, monopolistic competition, oligopoly and monopoly. A monopoly is a structure in which a single supplier produces and sells a given product. If there is a single seller in a certain market and there are no close substitutes for the product, then the market structure is that of a "pure monopoly". Sometimes, there are many sellers in an industry and/or there exist many close substitutes for the goods being produced, but nevertheless companies retain some market power. This is termed monopolistic competition, whereas in oligopoly the companies interact strategically.

In general, the main results from this theory compare price-fixing methods across market structures, analyze the effect of a certain structure on welfare, and vary technological/demand assumptions in order to assess the consequences for an abstract model of society. Most economic textbooks follow the practice of carefully explaining the perfect competition model, mainly because this helps to understand "departures" from it (the so-called imperfect competition models).

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 ("grapes sold during October 2009 in Moscow" is a different good from "grapes sold during October 2009 in New York"). Most studies of market structure relax a little their definition of a good, allowing for more flexibility in the identification of substitute goods.

Characteristics

  • Profit Maximizer: Maximizes profits.
  • Price Maker: Decides the price of the good or product to be sold, but does so by determining the quantity in order to demand the price desired by the firm.
  • High Barriers: Other sellers are unable to enter the market of the monopoly.
  • Single seller: In a monopoly, there is one seller of the good, who produces all the output.[5] Therefore, the whole market is being served by a single company, and for practical purposes, the company is the same as the industry.
  • Price Discrimination: A monopolist can change the price or quantity of the product. He or she sells higher quantities at a lower price in a very elastic market, and sells lower quantities at a higher price in a less elastic market.

Sources of monopoly power

Monopolies derive their market power from barriers to entry – circumstances that prevent or greatly impede a potential competitor's ability to compete in a market. There are three major types of barriers to entry: economic, legal and deliberate.[6]

  • Economic barriers: Economic barriers include economies of scale, capital requirements, cost advantages and technological superiority.[7]
  • Economies of scale: Decreasing unit costs for larger volumes of production.[8] Decreasing costs coupled with large initial costs, If for example the industry is large enough to support one company of minimum efficient scale then other companies entering the industry will operate at a size that is less than MES, and so cannot produce at an average cost that is competitive with the dominant company. Finally, if long-term average cost is constantly decreasing, the least cost method to provide a good or service is by a single company.[9]
  • Capital requirements: Production processes that require large investments of capital, perhaps in the form of large research and development costs or substantial sunk costs, limit the number of companies in an industry:[10] this is an example of economies of scale.
  • Technological superiority: A monopoly may be better able to acquire, integrate and use the best possible technology in producing its goods while entrants either do not have the expertise or are unable to meet the large fixed costs (see above) needed for the most efficient technology.[8] Thus one large company can often produce goods cheaper than several small companies.[11]
  • No substitute goods: A monopoly sells a good for which there is no close substitute. The absence of substitutes makes the demand for that good relatively inelastic, enabling monopolies to extract positive profits.
  • Control of natural resources: A prime source of monopoly power is the control of resources (such as raw materials) that are critical to the production of a final good.
  • Network externalities: The use of a product by a person can affect the value of that product to other people. This is the network effect. There is a direct relationship between the proportion of people using a product and the demand for that product. In other words, the more people who are using a product, the greater the probability that another individual will start to use the product. This reflects fads, fashion trends,[12] social networks etc. It also can play a crucial role in the development or acquisition of market power. The most famous current example is the market dominance of the Microsoft office suite and operating system in personal computers.
  • Legal barriers: Legal rights can provide opportunity to monopolise the market in a good. Intellectual property rights, including patents and copyrights, give a monopolist exclusive control of the production and selling of certain goods. Property rights may give a company exclusive control of the materials necessary to produce a good.
  • Manipulation: A company wanting to monopolise a market may engage in various types of deliberate action to exclude competitors or eliminate competition. Such actions include collusion, lobbying governmental authorities, and force (see anti-competitive practices).

In addition to barriers to entry and competition, barriers to exit may be a source of market power. Barriers to exit are market conditions that make it difficult or expensive for a company to end its involvement with a market. High liquidation costs are a primary barrier to exiting.[13] Market exit and shutdown are sometimes separate events. The decision whether to shut down or operate is not affected by exit barriers. A company will shut down if price falls below minimum average variable costs.

Monopoly versus competitive markets

While monopoly and perfect competition mark the extremes of market structures[14] there is some similarity. The cost functions are the same.[15] Both monopolies and perfectly competitive (PC) companies minimize cost and maximize profit. The shutdown decisions are the same. Both are assumed to have perfectly competitive factors markets. There are distinctions, some of the most important distinctions are as follows:

  • Marginal revenue and price: In a perfectly competitive market, price equals marginal cost. In a monopolistic market, however, price is set above marginal cost.[16]
  • Product differentiation: There is zero product differentiation in a perfectly competitive market. Every product is perfectly homogeneous and a perfect substitute for any other. With a monopoly, there is great to absolute product differentiation in the sense that there is no available substitute for a monopolized good. The monopolist is the sole supplier of the good in question.[17] A customer either buys from the monopolizing entity on its terms or does without.
  • Number of competitors: PC markets are populated by an infinite number of buyers and sellers. Monopoly involves a single seller.[17]
  • Barriers to Entry: Barriers to entry are factors and circumstances that prevent entry into market by would-be competitors and limit new companies from operating and expanding within the market. PC markets have free entry and exit. There are no barriers to entry, or exit competition. Monopolies have relatively high barriers to entry. The barriers must be strong enough to prevent or discourage any potential competitor from entering the market
  • Elasticity of Demand: The price elasticity of demand is the percentage change of demand caused by a one percent change of relative price. A successful monopoly would have a relatively inelastic demand curve. A low coefficient of elasticity is indicative of effective barriers to entry. A PC company has a perfectly elastic demand curve. The coefficient of elasticity for a perfectly competitive demand curve is infinite.
  • Excess Profits: Excess or positive profits are profit more than the normal expected return on investment. A PC company can make excess profits in the short term but excess profits attract competitors, which can enter the market freely and decrease prices, eventually reducing excess profits to zero.[18] A monopoly can preserve excess profits because barriers to entry prevent competitors from entering the market.[19]
  • Profit Maximization: A PC company maximizes profits by producing such that price equals marginal costs. A monopoly maximises profits by producing where marginal revenue equals marginal costs.[20] The rules are not equivalent. The demand curve for a PC company is perfectly elastic – flat. The demand curve is identical to the average revenue curve and the price line. Since the average revenue curve is constant the marginal revenue curve is also constant and equals the demand curve, Average revenue is the same as price (AR = TR/Q = P x Q/Q = P). Thus the price line is also identical to the demand curve. In sum, D = AR = MR = P.
  • P-Max quantity, price and profit: If a monopolist obtains control of a formerly perfectly competitive industry, the monopolist would increase prices, reduce production, and realise positive economic profits.[21]
  • Supply Curve: in a perfectly competitive market there is a well defined supply function with a one-to-one relationship between price and quantity supplied.[22] In a monopolistic market no such supply relationship exists. A monopolist cannot trace a short term supply curve because for a given price there is not a unique quantity supplied. As Pindyck and Rubenfeld note, a change in demand "can lead to changes in prices with no change in output, changes in output with no change in price or both".[23] Monopolies produce where marginal revenue equals marginal costs. For a specific demand curve the supply "curve" would be the price/quantity combination at the point where marginal revenue equals marginal cost. If the demand curve shifted the marginal revenue curve would shift as well and a new equilibrium and supply "point" would be established. The locus of these points would not be a supply curve in any conventional sense.[24][25]

The most significant distinction between a PC company and a monopoly is that the monopoly has a downward-sloping demand curve rather than the "perceived" perfectly elastic curve of the PC company.[26] Practically all the variations mentioned above relate to this fact. If there is a downward-sloping demand curve then by necessity there is a distinct marginal revenue curve. The implications of this fact are best made manifest with a linear demand curve. Assume that the inverse demand curve is of the form x = a − by. Then the total revenue curve is TR = ay − by2 and the marginal revenue curve is thus MR = a − 2by. From this several things are evident. First the marginal revenue curve has the same y intercept as the inverse demand curve. Second the slope of the marginal revenue curve is twice that of the inverse demand curve. Third the x intercept of the marginal revenue curve is half that of the inverse demand curve. What is not quite so evident is that the marginal revenue curve is below the inverse demand curve at all points.[26] Since all companies maximise profits by equating MR and MC it must be the case that at the profit-maximizing quantity MR and MC are less than price, which further implies that a monopoly produces less quantity at a higher price than if the market were perfectly competitive.

The fact that a monopoly has a downward-sloping demand curve means that the relationship between total revenue and output for a monopoly is much different than that of competitive companies.[27] Total revenue equals price times quantity. A competitive company has a perfectly elastic demand curve meaning that total revenue is proportional to output.[27] Thus the total revenue curve for a competitive company is a ray with a slope equal to the market price.[27] A competitive company can sell all the output it desires at the market price. For a monopoly to increase sales it must reduce price. Thus the total revenue curve for a monopoly is a parabola that begins at the origin and reaches a maximum value then continuously decreases until total revenue is again zero.[28] Total revenue has its maximum value when the slope of the total revenue function is zero. The slope of the total revenue function is marginal revenue. So the revenue maximizing quantity and price occur when MR = 0. For example, assume that the monopoly’s demand function is P = 50 − 2Q. The total revenue function would be TR = 50Q − 2Q2 and marginal revenue would be 50 − 4Q. Setting marginal revenue equal to zero we have

So the revenue maximizing quantity for the monopoly is 12.5 units and the revenue maximizing price is 25.

A company with a monopoly does not experience price pressure from competitors, although it may experience pricing pressure from potential competition. If a company increases prices too much, then others may enter the market if they are able to provide the same good, or a substitute, at a lesser price.[29] The idea that monopolies in markets with easy entry need not be regulated against is known as the "revolution in monopoly theory".[30]

A monopolist can extract only one premium, and getting into complementary markets does not pay. That is, the total profits a monopolist could earn if it sought to leverage its monopoly in one market by monopolizing a complementary market are equal to the extra profits it could earn anyway by charging more for the monopoly product itself. However, the one monopoly profit theorem is not true if customers in the monopoly good are stranded or poorly informed, or if the tied good has high fixed costs.

A pure monopoly has the same economic rationality of perfectly competitive companies, i.e. to optimise a profit function given some constraints. By the assumptions of increasing marginal costs, exogenous inputs' prices, and control concentrated on a single agent or entrepreneur, the optimal decision is to equate the marginal cost and marginal revenue of production. Nonetheless, a pure monopoly can – unlike a competitive company – alter the market price for its own convenience: a decrease of production results in a higher price. In the economics' jargon, it is said that pure monopolies have "a downward-sloping demand". An important consequence of such behaviour is worth noticing: typically a monopoly selects a higher price and lesser quantity of output than a price-taking company; again, less is available at a higher price.[31]

The inverse elasticity rule

A monopoly chooses that price that maximizes the difference between total revenue and total cost. The basic markup rule (as measured by the Lerner index) can be expressed as , where is the price elasticity of demand the firm faces.[32] The markup rules indicate that the ratio between profit margin and the price is inversely proportional to the price elasticity of demand.[32] The implication of the rule is that the more elastic the demand for the product the less pricing power the monopoly has.

Market power

Market power is the ability to increase the product's price above marginal cost without losing all customers.[33] Perfectly competitive (PC) companies have zero market power when it comes to setting prices. All companies of a PC market are price takers. The price is set by the interaction of demand and supply at the market or aggregate level. Individual companies simply take the price determined by the market and produce that quantity of output that maximizes the company's profits. If a PC company attempted to increase prices above the market level all its customers would abandon the company and purchase at the market price from other companies. A monopoly has considerable although not unlimited market power. A monopoly has the power to set prices or quantities although not both.[34] A monopoly is a price maker.[35] The monopoly is the market[36] and prices are set by the monopolist based on their circumstances and not the interaction of demand and supply. The two primary factors determining monopoly market power are the company's demand curve and its cost structure.[37]

Market power is the ability to affect the terms and conditions of exchange so that the price of a product is set by a single company (price is not imposed by the market as in perfect competition).[38][39] Although a monopoly's market power is great it is still limited by the demand side of the market. A monopoly has a negatively sloped demand curve, not a perfectly inelastic curve. Consequently, any price increase will result in the loss of some customers.

Price discrimination

Price discrimination allows a monopolist to increase its profit by charging higher prices for identical goods to those who are willing or able to pay more. For example, most economic textbooks cost more in the United States than in developing countries like Ethiopia. In this case, the publisher is using its government-granted copyright monopoly to price discriminate between the generally wealthier American economics students and the generally poorer Ethiopian economics students. Similarly, most patented medications cost more in the U.S. than in other countries with a (presumed) poorer customer base. Typically, a high general price is listed, and various market segments get varying discounts. This is an example of framing to make the process of charging some people higher prices more socially acceptable. Perfect price discrimination would allow the monopolist to charge each customer the exact maximum amount he would be willing to pay. This would allow the monopolist to extract all the consumer surplus of the market. While such perfect price discrimination is a theoretical construct, advances in information technology and micromarketing may bring it closer to the realm of possibility.

It is very important to realize that partial price discrimination can cause some customers who are inappropriately pooled with high price customers to be excluded from the market. For example, a poor student in the U.S. might be excluded from purchasing an economics textbook at the U.S. price, which the student may have been able to purchase at the Ethiopian price'. Similarly, a wealthy student in Ethiopia may be able to or willing to buy at the U.S. price, though naturally would hide such a fact from the monopolist so as to pay the reduced third world price. These are deadweight losses and decrease a monopolist's profits. As such, monopolists have substantial economic interest in improving their market information and market segmenting.

There is important information for one to remember when considering the monopoly model diagram (and its associated conclusions) displayed here. The result that monopoly prices are higher, and production output lesser, than a competitive company follow from a requirement that the monopoly not charge different prices for different customers. That is, the monopoly is restricted from engaging in price discrimination (this is termed first degree price discrimination, such that all customers are charged the same amount). If the monopoly were permitted to charge individualised prices (this is termed third degree price discrimination), the quantity produced, and the price charged to the marginal customer, would be identical to that of a competitive company, thus eliminating the deadweight loss; however, all gains from trade (social welfare) would accrue to the monopolist and none to the consumer. In essence, every consumer would be indifferent between (1) going completely without the product or service and (2) being able to purchase it from the monopolist.

As long as the price elasticity of demand for most customers is less than one in absolute value, it is advantageous for a company to increase its prices: it receives more money for fewer goods. With a price increase, price elasticity tends to increase, and in the optimum case above it will be greater than one for most customers.

A company maximizes profit by selling where marginal revenue equals marginal cost. A company that does not engage in price discrimination will charge the profit maximizing price, P*, to all its customers. In such circumstances there are customers who would be willing to pay a higher price than P* and those who will not pay P* but would buy at a lower price. A price discrimination strategy is to charge less price sensitive buyers a higher price and the more price sensitive buyers a lower price.[40] Thus additional revenue is generated from two sources. The basic problem is to identify customers by their willingness to pay.

The purpose of price discrimination is to transfer consumer surplus to the producer.[41] Consumer surplus is the difference between the value of a good to a consumer and the price the consumer must pay in the market to purchase it.[42] Price discrimination is not limited to monopolies.

Market power is a company’s ability to increase prices without losing all its customers. Any company that has market power can engage in price discrimination. Perfect competition is the only market form in which price discrimination would be impossible (a perfectly competitive company has a perfectly elastic demand curve and has zero market power).[41][43][44][45]

There are three forms of price discrimination. First degree price discrimination charges each consumer the maximum price the consumer is willing to pay. Second degree price discrimination involves quantity discounts. Third degree price discrimination involves grouping consumers according to willingness to pay as measured by their price elasticities of demand and charging each group a different price. Third degree price discrimination is the most prevalent type.

There are three conditions that must be present for a company to engage in successful price discrimination. First, the company must have market power.[46] Second, the company must be able to sort customers according to their willingness to pay for the good.[47] Third, the firm must be able to prevent resell.

A company must have some degree of market power to practice price discrimination. Without market power a company cannot charge more than the market price.[48] Any market structure characterized by a downward sloping demand curve has market power – monopoly, monopolistic competition and oligopoly.[46] The only market structure that has no market power is perfect competition.[48]

A company wishing to practice price discrimination must be able to prevent middlemen or brokers from acquiring the consumer surplus for themselves. The company accomplishes this by preventing or limiting resale. Many methods are used to prevent resale. For instance, persons are required to show photographic identification and a boarding pass before boarding an airplane. Most travelers assume that this practice is strictly a matter of security. However, a primary purpose in requesting photographic identification is to confirm that the ticket purchaser is the person about to board the airplane and not someone who has repurchased the ticket from a discount buyer.

The inability to prevent resale is the largest obstacle to successful price discrimination.[43] Companies have however developed numerous methods to prevent resale. For example, universities require that students show identification before entering sporting events. Governments may make it illegal to resale tickets or products. In Boston, Red Sox baseball tickets can only be resold legally to the team.

The three basic forms of price discrimination are first, second and third degree price discrimination. In first degree price discrimination the company charges the maximum price each customer is willing to pay. The maximum price a consumer is willing to pay for a unit of the good is the reservation price. Thus for each unit the seller tries to set the price equal to the consumer’s reservation price.[49] Direct information about a consumer’s willingness to pay is rarely available. Sellers tend to rely on secondary information such as where a person lives (postal codes); for example, catalog retailers can use mail high-priced catalogs to high-income postal codes.[50][51] First degree price discrimination most frequently occurs in regard to professional services or in transactions involving direct buyer/seller negotiations. For example, an accountant who has prepared a consumer's tax return has information that can be used to charge customers based on an estimate of their ability to pay.[52]

In second degree price discrimination or quantity discrimination customers are charged different prices based on how much they buy. There is a single price schedule for all consumers but the prices vary depending on the quantity of the good bought.[53] The theory of second degree price discrimination is a consumer is willing to buy only a certain quantity of a good at a given price. Companies know that consumer’s willingness to buy decreases as more units are purchased. The task for the seller is to identify these price points and to reduce the price once one is reached in the hope that a reduced price will trigger additional purchases from the consumer. For example, sell in unit blocks rather than individual units.

In third degree price discrimination or multi-market price discrimination[54] the seller divides the consumers into different groups according to their willingness to pay as measured by their price elasticity of demand. Each group of consumers effectively becomes a separate market with its own demand curve and marginal revenue curve.[44] The firm then attempts to maximize profits in each segment by equating MR and MC,[46][55][56] Generally the company charges a higher price to the group with a more price inelastic demand and a relatively lesser price to the group with a more elastic demand.[57] Examples of third degree price discrimination abound. Airlines charge higher prices to business travelers than to vacation travelers. The reasoning is that the demand curve for a vacation traveler is relatively elastic while the demand curve for a business traveler is relatively inelastic. Any determinant of price elasticity of demand can be used to segment markets. For example, seniors have a more elastic demand for movies than do young adults because they generally have more free time. Thus theaters will offer discount tickets to seniors.[58]

Example

Assume that by a uniform pricing system the monopolist would sell five units at a price of $10 per unit. Assume that his marginal cost is $5 per unit. Total revenue would be $50, total costs would be $25 and profits would be $25. If the monopolist practiced price discrimination he would sell the first unit for $50 the second unit for $40 and so on. Total revenue would be $150, his total cost would be $25 and his profit would be $125.00.[59] Several things are worth noting. The monopolist acquires all the consumer surplus and eliminates practically all the deadweight loss because he is willing to sell to anyone who is willing to pay at least the marginal cost.[59] Thus the price discrimination promotes efficiency. Secondly, by the pricing scheme price = average revenue and equals marginal revenue. That is the monopolist behaving like a perfectly competitive company.[60] Thirdly, the discriminating monopolist produces a larger quantity than the monopolist operating by a uniform pricing scheme.[61]

Qd Price
1 50
2 40
3 30
4 20
5 10

Classifying customers

Successful price discrimination requires that companies separate consumers according to their willingness to buy. Determining a customer's willingness to buy a good is difficult. Asking consumers directly is fruitless: consumers don't know, and to the extent they do they are reluctant to share that information with marketers. The two main methods for determining willingness to buy are observation of personal characteristics and consumer actions. As noted information about where a person lives (postal codes), how the person dresses, what kind of car he or she drives, occupation, and income and spending patterns can be helpful in classifying.

Monopoly and efficiency

Monopoly-surpluses
Surpluses and deadweight loss created by monopoly price setting

According to the standard model, in which a monopolist sets a single price for all consumers, the monopolist will sell a lesser quantity of goods at a higher price than would companies by perfect competition. Because the monopolist ultimately forgoes transactions with consumers who value the product or service more than its price, monopoly pricing creates a deadweight loss referring to potential gains that went neither to the monopolist nor to consumers. Given the presence of this deadweight loss, the combined surplus (or wealth) for the monopolist and consumers is necessarily less than the total surplus obtained by consumers by perfect competition. Where efficiency is defined by the total gains from trade, the monopoly setting is less efficient than perfect competition.[63]

It is often argued that monopolies tend to become less efficient and less innovative over time, becoming "complacent", because they do not have to be efficient or innovative to compete in the marketplace. Sometimes this very loss of psychological efficiency can increase a potential competitor's value enough to overcome market entry barriers, or provide incentive for research and investment into new alternatives. The theory of contestable markets argues that in some circumstances (private) monopolies are forced to behave as if there were competition because of the risk of losing their monopoly to new entrants. This is likely to happen when a market's barriers to entry are low. It might also be because of the availability in the longer term of substitutes in other markets. For example, a canal monopoly, while worth a great deal during the late 18th century United Kingdom, was worth much less during the late 19th century because of the introduction of railways as a substitute.

Contrary to common misconception, monopolists do not try to sell items for the highest possible price, nor do they try to maximize profit per unit, but rather they try to maximize total profit.[64]

Natural monopoly

A natural monopoly is an organization that experiences increasing returns to scale over the relevant range of output and relatively high fixed costs.[65] A natural monopoly occurs where the average cost of production "declines throughout the relevant range of product demand". The relevant range of product demand is where the average cost curve is below the demand curve.[66] When this situation occurs, it is always cheaper for one large company to supply the market than multiple smaller companies; in fact, absent government intervention in such markets, will naturally evolve into a monopoly. An early market entrant that takes advantage of the cost structure and can expand rapidly can exclude smaller companies from entering and can drive or buy out other companies. A natural monopoly suffers from the same inefficiencies as any other monopoly. Left to its own devices, a profit-seeking natural monopoly will produce where marginal revenue equals marginal costs. Regulation of natural monopolies is problematic. Fragmenting such monopolies is by definition inefficient. The most frequently used methods dealing with natural monopolies are government regulations and public ownership. Government regulation generally consists of regulatory commissions charged with the principal duty of setting prices.[67]

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.[68] This pricing scheme eliminates any positive economic profits since price equals average cost. Average-cost pricing is not perfect. Regulators must estimate average costs. Companies have a reduced incentive to lower costs. Regulation of this type has not been limited to natural monopolies.[68] Average-cost pricing does also have some disadvantages. By setting price equal to the intersection of the demand curve and the average total cost curve, the firm's output is allocatively inefficient as the price is less than the marginal cost (which is the output quantity for a perfectly competitive and allocatively efficient market).

Government-granted monopoly

A government-granted monopoly (also called a "de jure monopoly") is a form of coercive monopoly, in which a government grants exclusive privilege to a private individual or company to be the sole provider of a commodity. Monopoly may be granted explicitly, as when potential competitors are excluded from the market by a specific law, or implicitly, such as when the requirements of an administrative regulation can only be fulfilled by a single market player, or through some other legal or procedural mechanism, such as patents, trademarks, and copyright[69].

Monopolist shutdown rule

A monopolist should shut down when price is less than average variable cost for every output level[70] – in other words where the demand curve is entirely below the average variable cost curve.[70] Under these circumstances at the profit maximum level of output (MR = MC) average revenue would be less than average variable costs and the monopolists would be better off shutting down in the short term.[70]

Breaking up monopolies

In a free market, monopolies can be ended at any time by new competition, breakaway businesses, or consumers seeking alternatives. In a highly regulated market environment a government will often either regulate the monopoly, convert it into a publicly owned monopoly environment, or forcibly fragment it (see Antitrust law and trust busting). Public utilities, often being naturally efficient with only one operator and therefore less susceptible to efficient breakup, are often strongly regulated or publicly owned. American Telephone & Telegraph (AT&T) and Standard Oil are often cited as examples of the breakup of a private monopoly by government. Standard Oil never achieved monopoly status, a consequence of existing in a market open to competition for the duration of its existence. The Bell System, later AT&T, was protected from competition first by the Kingsbury Commitment, and later by a series of agreements between AT&T and the Federal Government. In 1984, decades after having been granted monopoly power by force of law, AT&T was broken up into various components, MCI, Sprint, who were able to compete effectively in the long distance phone market.

Law

The law regulating dominance in the European Union is governed by Article 102 of the Treaty on the Functioning of the European Union which aims at enhancing the consumer’s welfare and also the efficiency of allocation of resources by protecting competition on the downstream market.[71] The existence of a very high market share does not always mean consumers are paying excessive prices since the threat of new entrants to the market can restrain a high-market-share company's price increases. Competition law does not make merely having a monopoly illegal, but rather abusing the power a monopoly may confer, for instance through exclusionary practices (i.e. pricing high just because you are the only one around.) It may also be noted that it is illegal to try to obtain a monopoly, by practices of buying out the competition, or equal practices. If one occurs naturally, such as a competitor going out of business, or lack of competition, it is not illegal until such time as the monopoly holder abuses the power.

Establishing Dominance

First it is necessary to determine whether a company is dominant, or whether it behaves "to an appreciable extent independently of its competitors, customers and ultimately of its consumer". Establishing dominance is a two stage test. The first thing to consider is market definition which is one of the crucial factors of the test.[72] It includes relevant product market and relevant geographic market.

Relevant Product Market

As the definition of the market is of a matter of interchangeability, if the goods or services are regarded as interchangeable then they are within the same product market.[73] For example, in the case of United Brands v Commission,[74] it was argued in this case that bananas and other fresh fruit were in the same product market and later on dominance was found because the special features of the banana made it could only be interchangeable with other fresh fruits in a limited extent and other and is only exposed to their competition in a way that is hardly perceptible. The demand substitutability of the goods and services will help in defining the product market and it can be access by the ‘hypothetical monopolist’ test or the ‘SSNIP’ test .[75]

Relevant Geographic Market

It is necessary to define it because some goods can only be supplied within a narrow area due to technical, practical or legal reasons and this may help to indicate which undertakings impose a competitive constraint on the other undertakings in question. Since some goods are too expensive to transport where it might not be economic to sell them to distant markets in relation to their value, therefore the cost of transporting is a crucial factor here. Other factors might be legal controls which restricts an undertaking in a Member States from exporting goods or services to another.

Market definition may be difficult to measure but is important because if it is defined too broadly, the undertaking may be more likely to be found dominant and if it is defined too narrowly, the less likely that it will be found dominant.

Market shares

As with collusive conduct, market shares are determined with reference to the particular market in which the company and product in question is sold. It does not in itself determine whether an undertaking is dominant but work as an indicator of the states of the existing competition within the market. The Herfindahl-Hirschman Index (HHI) is sometimes used to assess how competitive an industry is. It sums up the squares of the individual market shares of all of the competitors within the market. The lower the total, the less concentrated the market and the higher the total, the more concentrated the market.[76] In the US, the merger guidelines state that a post-merger HHI below 1000 is viewed as not concentrated while HHIs above that will provoke further review.

By European Union law, very large market shares raise a presumption that a company is dominant, which may be rebuttable. A market share of 100% may be very rare but it is still possible to be found and in fact it has been identified in some cases, for instance the AAMS v Commission case.[77] Undertakings possessing market share that is lower than 100% but over 90% had also been found dominant, for example, Microsoft v Commission case.[78] In the AKZO v Commission case,[79] the undertaking is presumed to be dominant if it has a market share of 50%. There are also findings of dominance that are below a market share of 50%, for instance, United Brands v Commission,[74] it only possessed a market share of 40% to 45% and still to be found dominant with other factors. The lowest yet market share of a company considered "dominant" in the EU was 39.7%.If a company has a dominant position, then there is a special responsibility not to allow its conduct to impair competition on the common market however these will all falls away if it is not dominant.[80]

When considering whether an undertaking is dominant, it involves a combination of factors. Each of them cannot be taken separately as if they are, they will not be as determinative as they are when they are combined together.[81] Also, in cases where an undertaking has previously been found dominant, it is still necessary to redefine the market and make a whole new analysis of the conditions of competition based on the available evidence at the appropriate time.[82]

Other Related Factors

According to the Guidance, there are three more issues that must be examined. They are actual competitors that relates to the market position of the dominant undertaking and its competitors, potential competitors that concerns the expansion and entry and lastly the countervailing buyer power.[81]

  • Actual Competitors

Market share may be a valuable source of information regarding the market structure and the market position when it comes to accessing it. The dynamics of the market and the extent to which the goods and services differentiated are relevant in this area.[81]

  • Potential Competitors

It concerns with the competition that would come from other undertakings which are not yet operating in the market but will enter it in the future. So, market shares may not be useful in accessing the competitive pressure that is exerted on an undertaking in this area. The potential entry by new firms and expansions by an undertaking must be taken into account,[81] therefore the barriers to entry and barriers to expansion is an important factor here.

  • Countervailing Buyer Power

Competitive Constraints may not always come from actual or potential competitors. Sometimes, it may also come from powerful customers who have sufficient bargaining strength which come from its size or its commercial significance for a dominant firm.[81]

Types of Abuses

There are three main types of abuses which are exploitative abuse, exclusionary abuse and single market abuse.

  • Exploitative Abuse

It arises when a monopolist has such significant market power that it can restrict its output while increasing the price above the competitive level without losing customers.[76] This type is less concerned by the Commission than other types.

  • Exclusionary Abuse

This is most concerned about by the Commissions because it is capable of causing long- term consumer damage and is more likely to prevent the development of competition.[76] An example of it is exclusive dealing agreements.

  • Single Market Abuse

It arises when a dominant undertaking carrying out excess pricing which would not only have an exploitative effect but also prevent parallel imports and limits intra- brand competition.[76]

Examples of Abuses

Despite wide agreement that the above constitute abusive practices, there is some debate about whether there needs to be a causal connection between the dominant position of a company and its actual abusive conduct. Furthermore, there has been some consideration of what happens when a company merely attempts to abuse its dominant position.

Historical monopolies

Origin

The term "monopoly" first appears in Aristotle's Politics. Aristotle describes Thales of Miletus's cornering of the market in olive presses as a monopoly (μονοπώλιον).[83][84]

Another early reference to the concept of “monopoly” in a commercial sense appears in tractate Demai of the Mishna (2nd century C.E.), regarding the purchasing of agricultural goods from a dealer who has a monopoly on the produce (chapter 5; 4).[85]

The meaning and understanding of the English word 'monopoly' has changed over the years.[86]

Monopolies of resources

Salt

Vending of common salt (sodium chloride) was historically a natural monopoly. Until recently, a combination of strong sunshine and low humidity or an extension of peat marshes was necessary for producing salt from the sea, the most plentiful source. Changing sea levels periodically caused salt "famines" and communities were forced to depend upon those who controlled the scarce inland mines and salt springs, which were often in hostile areas (e.g. the Sahara desert) requiring well-organised security for transport, storage, and distribution.

The Salt Commission was a legal monopoly in China. Formed in 758, the Commission controlled salt production and sales in order to raise tax revenue for the Tang Dynasty.

The "Gabelle" was a notoriously high tax levied upon salt in the Kingdom of France. The much-hated levy had a role in the beginning of the French Revolution, when strict legal controls specified who was allowed to sell and distribute salt. First instituted in 1286, the Gabelle was not permanently abolished until 1945.[87]

Coal

Robin Gollan argues in The Coalminers of New South Wales that anti-competitive practices developed in the coal industry of Australia's Newcastle as a result of the business cycle. The monopoly was generated by formal meetings of the local management of coal companies agreeing to fix a minimum price for sale at dock. This collusion was known as "The Vend". The Vend ended and was reformed repeatedly during the late 19th century, ending by recession in the business cycle. "The Vend" was able to maintain its monopoly due to trade union assistance, and material advantages (primarily coal geography). During the early 20th century, as a result of comparable monopolistic practices in the Australian coastal shipping business, the Vend developed as an informal and illegal collusion between the steamship owners and the coal industry, eventually resulting in the High Court case Adelaide Steamship Co. Ltd v. R. & AG.[88]

Petroleum

Standard Oil was an American oil producing, transporting, refining, and marketing company. Established in 1870, it became the largest oil refiner in the world.[89] John D. Rockefeller was a founder, chairman and major shareholder. The company was an innovator in the development of the business trust. The Standard Oil trust streamlined production and logistics, lowered costs, and undercut competitors. "Trust-busting" critics accused Standard Oil of using aggressive pricing to destroy competitors and form a monopoly that threatened consumers. Its controversial history as one of the world's first and largest multinational corporations ended in 1911, when the United States Supreme Court ruled that Standard was an illegal monopoly. The Standard Oil trust was dissolved into 33 smaller companies; two of its surviving "child" companies are ExxonMobil and the Chevron Corporation.

Steel

U.S. Steel has been accused of being a monopoly. J. P. Morgan and Elbert H. Gary founded U.S. Steel in 1901 by combining Andrew Carnegie's Carnegie Steel Company with Gary's Federal Steel Company and William Henry "Judge" Moore's National Steel Company.[90][91] At one time, U.S. Steel was the largest steel producer and largest corporation in the world. In its first full year of operation, U.S. Steel made 67 percent of all the steel produced in the United States. However, U.S. Steel's share of the expanding market slipped to 50 percent by 1911,[92] and anti-trust prosecution that year failed.

Diamonds

De Beers settled charges of price fixing in the diamond trade in the 2000s. De Beers is well known for its monopoloid practices throughout the 20th century, whereby it used its dominant position to manipulate the international diamond market. The company used several methods to exercise this control over the market. Firstly, it convinced independent producers to join its single channel monopoly, it flooded the market with diamonds similar to those of producers who refused to join the cartel, and lastly, it purchased and stockpiled diamonds produced by other manufacturers in order to control prices through limiting supply.

In 2000, the De Beers business model changed due to factors such as the decision by producers in Russia, Canada and Australia to distribute diamonds outside the De Beers channel, as well as rising awareness of blood diamonds that forced De Beers to "avoid the risk of bad publicity" by limiting sales to its own mined products. De Beers' market share by value fell from as high as 90% in the 1980s to less than 40% in 2012, having resulted in a more fragmented diamond market with more transparency and greater liquidity.

In November 2011 the Oppenheimer family announced its intention to sell the entirety of its 40% stake in De Beers to Anglo American plc thereby increasing Anglo American's ownership of the company to 85%.[30] The transaction was worth £3.2 billion ($5.1 billion) in cash and ended the Oppenheimer dynasty's 80-year ownership of De Beers.

Utilities

A public utility (or simply "utility") is an organization or company that maintains the infrastructure for a public service or provides a set of services for public consumption. Common examples of utilities are electricity, natural gas, water, sewage, cable television, and telephone. In the United States, public utilities are often natural monopolies because the infrastructure required to produce and deliver a product such as electricity or water is very expensive to build and maintain.[93]

Western Union was criticized as a "price gouging" monopoly in the late 19th century.[94]

American Telephone & Telegraph was a telecommunications giant. AT&T was broken up in 1984.

In the case of Telecom New Zealand, local loop unbundling was enforced by central government.

Telkom is a semi-privatised, part state-owned South African telecommunications company.

Deutsche Telekom is a former state monopoly, still partially state owned. Deutsche Telekom currently monopolizes high-speed VDSL broadband network.[95]

The Long Island Power Authority (LIPA) provided electric service to over 1.1 million customers in Nassau and Suffolk counties of New York, and the Rockaway Peninsula in Queens.

The Comcast Corporation is the largest mass media and communications company in the world by revenue.[96] It is the largest cable company and home Internet service provider in the United States, and the nation's third largest home telephone service provider. Comcast has a monopoly in Boston, Philadelphia, and many other small towns across the US.

Transportation

The United Aircraft and Transport Corporation was an aircraft manufacturer holding company that was forced to divest itself of airlines in 1934.

Iarnród Éireann, the Irish Railway authority, is a current monopoly as Ireland does not have the size for more companies.

The Long Island Rail Road (LIRR) was founded in 1834, and since the mid-1800s has provided train service between Long Island and New York City. In the 1870s, LIRR became the sole railroad in that area through a series of acquisitions and consolidations. In 2013, the LIRR's commuter rail system is the busiest commuter railroad in North America, serving nearly 335,000 passengers daily.[97]

Foreign trade

Dutch East India Company was created as a legal trading monopoly in 1602. The Vereenigde Oost-Indische Compagnie enjoyed huge profits from its spice monopoly through most of the 17th century.[98]

The British East India Company was created as a legal trading monopoly in 1600. The East India Company was formed for pursuing trade with the East Indies but ended up trading mainly with the Indian subcontinent, North-West Frontier Province, and Balochistan. The Company traded in basic commodities, which included cotton, silk, indigo dye, salt, saltpetre, tea and opium.

Professional sports

Major League Baseball survived U.S. anti-trust litigation in 1922, though its special status is still in dispute as of 2009.

The National Football League survived anti-trust lawsuit in the 1960s but was convicted of being an illegal monopoly in the 1980s.

Other examples of monopolies

Countering monopolies

According to professor Milton Friedman, laws against monopolies cause more harm than good, but unnecessary monopolies should be countered by removing tariffs and other regulation that upholds monopolies.

A monopoly can seldom be established within a country without overt and covert government assistance in the form of a tariff or some other device. It is close to impossible to do so on a world scale. The De Beers diamond monopoly is the only one we know of that appears to have succeeded (and even De Beers are protected by various laws against so called "illicit" diamond trade). – In a world of free trade, international cartels would disappear even more quickly.

— Milton Friedman, Free to Choose, p. 53–54

However, professor Steve H. Hanke believes that although private monopolies are more efficient than public ones, often by a factor of two, sometimes private natural monopolies, such as local water distribution, should be regulated (not prohibited) by, e.g., price auctions.[102]

Thomas DiLorenzo asserts, however, that during the early days of utility companies where there was little regulation, there were no natural monopolies and there was competition.[103] Only when companies realized that they could gain power through government did monopolies begin to form.

Baten, Bianchi and Moser[104] find historical evidence that monopolies which are protected by patent laws may have adverse effects on the creation of innovation in an economy. They argue that under certain circumstances, compulsory licensing – which allows governments to license patents without the consent of patent-owners – may be effective in promoting invention by increasing the threat of competition in fields with low pre-existing levels of competition.

See also

Notes and references

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  2. ^ Milton Friedman (February 2002) [1962]. "VIII: Monopoly and the Social Responsibility of Business and Labor". Capitalism and Freedom (paperback) (40th anniversary ed.). The University of Chicago Press. p. 208. ISBN 0-226-26421-1.
  3. ^ Blinder, Alan S; Baumol, William J; Gale, Colton L (June 2001). "11: Monopoly". Microeconomics: Principles and Policy (paperback). Thomson South-Western. p. 212. ISBN 0-324-22115-0. A pure monopoly is an industry in which there is only one supplier of a product for which there are no close substitutes and in which is very difficult or impossible for another firm to coexist
  4. ^ a b Orbach, Barak; Campbell, Grace (2012). "The Antitrust Curse of Bigness". Southern California Law Review. SSRN 1856553.
  5. ^ Binger and Hoffman (1998), p. 391.
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  13. ^ Png, Ivan (1999). Managerial Economics. Blackwell. p. 271. ISBN 1-55786-927-8.
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  19. ^ Melvin and Boyes (2002), p. 245.
  20. ^ Varian, H (1992). Microeconomic Analysis (3rd ed.). Norton. p. 235.
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  22. ^ Frank (2008), p. 342.
  23. ^ Pindyck and Rubenfeld (2000), p. 325.
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  25. ^ Perfectly competitive firms are price takers. Price is exogenous and it is possible to associate each price with unique profit maximizing quantity. Besanko, David, and Ronald Braeutigam, Microeconomics 2nd ed., Wiley (2005), p. 413.
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  52. ^ If the monopolist is able to segment the market perfectly, then the average revenue curve effectively becomes the marginal revenue curve for the company and the company maximizes profits by equating price and marginal costs. That is the company is behaving like a perfectly competitive company. The monopolist will continue to sell extra units as long as the extra revenue exceeds the marginal cost of production. The problem that the company has is that the company must charge a different price for each successive unit sold.
  53. ^ Varian (1992), p. 242.
  54. ^ Perloff (2009), p. 396.
  55. ^ Because MC is the same in each market segment the profit maximizing condition becomes produce where MR1 = MR2 = MC. Pindyck and Rubinfeld (2009), pp. 398–99.
  56. ^ As Pindyck and Rubinfeld note, managers may find it easier to conceptualize the problem of what price to charge in each segment in terms of relative prices and price elasticities of demand. Marginal revenue can be written in terms of elasticities of demand as MR = P(1+1/PED). Equating MR1 and MR2 we have P1 (1+1/PED) = P2 (1+1/PED) or P1/P2 = (1+1/PED2)/(1+1/PED1). Using this equation the manager can obtain elasticity information and set prices for each segment. [Pindyck and Rubinfeld (2009), pp. 401–02.] Note that the manager may be able to obtain industry elasticities, which are far more inelastic than the elasticity for an individual firm. As a rule of thumb the company’s elasticity coefficient is 5 to 6 times that of the industry. [Pindyck and Rubinfeld (2009) pp. 402.]
  57. ^ Colander, David C., p. 269.
  58. ^ Note that the discounts apply only to tickets not to concessions. The reason there is not any popcorn discount is that there is not any effective way to prevent resell. A profit maximizing theater owner maximizes concession sales by selling where marginal revenue equals marginal cost.
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Further reading

  • Guy Ankerl, Beyond Monopoly Capitalism and Monopoly Socialism. Cambridge, Massachusetts: Schenkman Pbl., 1978. ISBN 0-87073-938-7

External links

Media related to Monopoly at Wikimedia Commons

1017 Records

1017 Records, also known as 1017 Eskimo and 1017 Bricksquad, is an American record label founded by Gucci Mane after his departure from Mizay Entertainment and the closing of So Icey. The label is home to Chief Keef, Lil Quill, Yung Mal, Hoodrich Pablo Juan, Ralo, and Asian Doll.

Bilateral monopoly

A bilateral monopoly is a market structure consisting of both a monopoly (a single seller) and a monopsony (a single buyer).

East India Company

The East India Company (EIC), also known as the Honourable East India Company (HEIC) or the British East India Company and informally as John Company, Company Bahadur, or simply The Company, was an English and later British joint-stock company. It was formed to trade in the Indian Ocean region, initially with Mughal India and the East Indies (Maritime Southeast Asia), and later with Qing China. The company ended up seizing control over large parts of the Indian subcontinent, colonised parts of Southeast Asia, and colonised Hong Kong after a war with Qing China.

Originally chartered as the "Governor and Company of Merchants of London trading into the East Indies", the company rose to account for half of the world's trade, particularly in basic commodities including cotton, silk, indigo dye, salt, spices, saltpetre, tea, and opium. The company also ruled the beginnings of the British Empire in India. In his speech to the House of Commons in July 1833, Lord Macaulay explained that since the beginning, the East India company had always been involved in both trade and politics, just as its French and Dutch counterparts had been.The company received a Royal Charter from Queen Elizabeth I on 31 December 1600, coming relatively late to trade in the Indies. Before them the Portuguese Estado da Índia had traded there for much of the 16th century and the first of half a dozen Dutch Companies sailed to trade there from 1595. These Dutch companies amalgamated in March 1602 into the United East Indies Company (VOC), which introduced the first permanent joint stock from 1612 (meaning investment into shares did not need to be returned, but could be traded on a stock exchange). By contrast, wealthy merchants and aristocrats owned the EIC's shares. Initially the government owned no shares and had only indirect control until 1657 when permanent joint stock was established.During its first century of operation, the focus of the company was trade, not the building of an empire in India. Company interests turned from trade to territory during the 18th century as the Mughal Empire declined in power and the East India Company struggled with its French counterpart, the French East India Company (Compagnie française des Indes orientales) during the Carnatic Wars of the 1740s and 1750s. The battles of Plassey and Buxar, in which the British defeated the Bengali powers, left the company in control of Bengal and a major military and political power in India. In the following decades it gradually increased the extent of the territories under its control, controlling the majority of the Indian subcontinent either directly or indirectly via local puppet rulers under the threat of force by its Presidency armies, much of which were composed of native Indian sepoys.

By 1803, at the height of its rule in India, the British East India company had a private army of about 260,000—twice the size of the British Army, with Indian revenues of £13,464,561 (£1,359,675,850.80 as of 2018), and expenses of £14,017,473 (£1,415,509,909.85 as of 2018). The company eventually came to rule large areas of India with its private armies, exercising military power and assuming administrative functions. Company rule in India effectively began in 1757 and lasted until 1858, when, following the Indian Rebellion of 1857, the Government of India Act 1858 led to the British Crown's assuming direct control of the Indian subcontinent in the form of the new British Raj.

Despite frequent government intervention, the company had recurring problems with its finances. It was dissolved in 1874 as a result of the East India Stock Dividend Redemption Act passed one year earlier, as the Government of India Act had by then rendered it vestigial, powerless, and obsolete. The official government machinery of British India assumed the East India Company's governmental functions and absorbed its navy and its armies in 1858.

History of the board game Monopoly

The board game Monopoly has its origin in the early 20th century. The earliest known version of Monopoly, known as The Landlord's Game, was designed by an American, Elizabeth Magie, and first patented in 1904 but existed as early as 1902. Magie, a follower of Henry George, originally intended The Landlord's Game to illustrate the economic consequences of Ricardo's Law of Economic rent and the Georgist concepts of economic privilege and land value taxation. A series of board games was developed from 1906 through the 1930s that involved the buying and selling of land and the development of that land. By 1933, a board game had been created much like the version of Monopoly sold by Parker Brothers and its related companies through the rest of the 20th century, and into the 21st. Several people, mostly in the midwestern United States and near the East Coast of the United States East Coast, contributed to the game's design and evolution.

By the 1970s, the idea that the game had been created solely by Charles Darrow had become popular folklore; it was printed in the game's instructions for many years, in a 1974 book devoted to Monopoly, and was cited in a general book about toys even as recently as 2007. Even a guide to family games published for Reader's Digest in 2003 only gave credit to Darrow and Elizabeth Magie, erroneously stating that Magie's original game was created in the 19th century, and not acknowledging any of the game's development between Magie's creation of the game, and the eventual publication by Parker Brothers.Also in the 1970s, Professor Ralph Anspach, who had himself published a board game intended to illustrate the principles of both monopolies and trust busting, fought Parker Brothers and its then parent company, General Mills, over the copyright and trademarks of the Monopoly board game. Through the research of Anspach and others, much of the early history of the game was "rediscovered" and entered into official United States court records. Because of the lengthy court process, including appeals, the legal status of Parker Brothers' copyright and trademarks on the game was not settled until 1985. The game's name remains a registered trademark of Parker Brothers, as do its specific design elements; other elements of the game are still protected under copyright law. At the conclusion of the court case, the game's logo and graphic design elements became part of a larger Monopoly brand, licensed by Parker Brothers' parent companies onto a variety of items through the present day. Despite the "rediscovery" of the board game's early history in the 1970s and 1980s, and several books and journal articles on the subject, Hasbro (which became Parker Brothers' parent company) did not acknowledge any of the game's history before Charles Darrow on its official Monopoly website as recently as June 2012, nor did they acknowledge anyone other than Darrow in materials published or sponsored by them, at least as recently as 2009.International tournaments, first held in the early 1970s, continue to the present, although the last national tournaments and world championship were held in 2009. Starting in 1985, a new generation of spin-off board games and card games appeared on both sides of the Atlantic Ocean. In 1989, the first of many video game and computer game editions was published. Since 1994, many official variants of the game, based on locations other than Atlantic City, New Jersey (the official U.S. setting) or London (the official Commonwealth setting, excepting Canada), have been published by Hasbro or its licensees. In 2008, Hasbro permanently changed the color scheme and some of the gameplay of the standard U.S. Edition of the game to match the UK Edition, although the U.S. standard edition maintains the Atlantic City property names. Hasbro also modified the official logo to give the "Mr. Monopoly" character a 3-D computer-generated look, which has since been adopted by licensees USAopoly, Winning Moves and Winning Solutions. And Hasbro has also been including the Speed Die, introduced in 2006's Monopoly: The Mega Edition by Winning Moves Games, in versions produced directly by Hasbro (such as the 2009 Championship Edition).

Intellectual property

Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. Intellectual property encompasses two types of rights; industrial property rights (trademarks, patents, designations of origin, industrial designs and models) and copyright. It was not until the 19th century that the term "intellectual property" began to be used, and not until the late 20th century that it became commonplace in the majority of the world.The main purpose of intellectual property law is to encourage the creation of a large variety of intellectual goods. To achieve this, the law gives people and businesses property rights to the information and intellectual goods they create – usually for a limited period of time. This gives economic incentive for their creation, because it allows people to profit from the information and intellectual goods they create. These economic incentives are expected to stimulate innovation and contribute to the technological progress of countries, which depends on the extent of protection granted to innovators.The intangible nature of intellectual property presents difficulties when compared with traditional property like land or goods. Unlike traditional property, intellectual property is "indivisible" – an unlimited number of people can "consume" an intellectual good without it being depleted. Additionally, investments in intellectual goods suffer from problems of appropriation – a landowner can surround their land with a robust fence and hire armed guards to protect it, but a producer of information or an intellectual good can usually do very little to stop their first buyer from replicating it and selling it at a lower price. Balancing rights so that they are strong enough to encourage the creation of intellectual goods but not so strong that they prevent the goods' wide use is the primary focus of modern intellectual property law.

Inventor

An inventor is a person who creates or discovers a new method, form, device or other useful means that becomes known as an invention. The word inventor comes from the Latin verb invenire, invent-, to find. The system of patents was established to encourage inventors by granting limited-term, limited monopoly on inventions determined to be sufficiently novel, non-obvious, and useful. Although inventing is closely associated with science and engineering, inventors are not necessarily engineers nor scientists.

McDonald's Monopoly

The McDonald's Monopoly game is a sales promotion of McDonald's and Hasbro, which uses the theme of the latter's board game Monopoly. The game first ran in the U.S. in 1987 and has since been used worldwide.

The promotion has used other names, such as Monopoly: Pick Your Prize! (2001), Monopoly Best Chance Game (2003–2005), Monopoly/Millionaire Game, Prize Vault (2013-2014), Money Monopoly (2016-), Coast To Coast (2015-) in Canada, Golden Chances in the UK (2015-), Prize Choice in the UK (2016-), Win Win in the UK (2017-) and Wiiiin!! in the UK (2018-).

Monopoly (game)

Monopoly is a board game that is currently published by Hasbro. In the game, players roll two six-sided dice to move around the game board, buying and trading properties, and developing them with houses and hotels. Players collect rent from their opponents, with the goal being to drive them into bankruptcy. Money can also be gained or lost through Chance and Community Chest cards, and tax squares; players can end up in jail, which they cannot move from until they have met one of several conditions. The game has numerous house rules, and hundreds of different editions exist, as well as many spin-offs and related media. Monopoly has become a part of international popular culture, having been licensed locally in more than 103 countries and printed in more than 37 languages.

Monopoly is derived from The Landlord's Game created by Lizzie Magie in the United States in 1903 as a way to demonstrate that an economy which rewards wealth creation is better than one where monopolists work under few constraints, and to promote the economic theories of Henry George—in particular his ideas about taxation. It was first published by Parker Brothers in 1935. The game is named after the economic concept of monopoly—the domination of a market by a single entity.

Monopoly on violence

The monopoly of the legitimate use of physical force, also known as the monopoly on violence (German: Gewaltmonopol des Staates), is a core concept of modern public law, which goes back to Jean Bodin's 1576 work Les Six livres de la République and Thomas Hobbes' 1651 book Leviathan. As the defining conception of the state, it was first described in sociology by Max Weber in his essay Politics as a Vocation (1919). Weber claims that the state is the "only human Gemeinschaft which lays claim to the monopoly on the legitimated use of physical force. However, this monopoly is limited to a certain geographical area, and in fact this limitation to a particular area is one of the things that defines a state." In other words, Weber describes the state as any organization that succeeds in holding the exclusive right to use, threaten, or authorize physical force against residents of its territory. Such a monopoly, according to Weber, must occur via a process of legitimation.

Monopoly video games

There have been more than a dozen video game adaptations of Parker Brothers and Hasbro's board game Monopoly.

Natural monopoly

A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming advantage over potential competitors. This frequently occurs in industries where capital costs predominate, creating economies of scale that are large in relation to the size of the market; examples include public utilities such as water services and electricity. Natural monopolies were discussed as a potential source of market failure by John Stuart Mill, who advocated government regulation to make them serve the public good.

Pub crawl

A pub crawl (sometimes called a bar tour, bar crawl or bar-hopping) is the act of drinking in multiple pubs or bars in a single night.

Rich Uncle Pennybags

Rich Uncle Pennybags is the mascot of the game Monopoly. He is depicted as a portly old man with a moustache who wears a morning suit with a bowtie and top hat. In large parts of the world he is known, additionally or exclusively, as the Monopoly Man, or Mr. Monopoly. He also appears in the related games Advance to Boardwalk, Free Parking, Don't Go to Jail, Monopoly City, Monopoly Junior, and Monopoly Deal.

The character first appeared on Chance and Community Chest cards in U.S. editions of Monopoly in 1936. The identity of the designer of the character, artist Dan Fox, was unknown until 2013, when a former Parker Brothers executive, Philip Orbanes, was contacted by one of Fox's grandchildren.Contrary to popular opinion, Rich Uncle Pennybags does not have a monocle and the confusion may come from another advertising icon, Mr. Peanut, who, in fact, does wear a monocle.

Sherman Antitrust Act of 1890

The Sherman Antitrust Act of 1890 (26 Stat. 209, 15 U.S.C. §§ 1–7) was a United States antitrust law that was passed by Congress under the presidency of Benjamin Harrison, which regulates competition among enterprises.

The Sherman Act broadly prohibits (1) anticompetitive agreements and (2) unilateral conduct that monopolizes or attempts to monopolize the relevant market. The Act authorizes the Department of Justice to bring suits to enjoin (i.e. prohibit) conduct violating the Act, and additionally authorizes private parties injured by conduct violating the Act to bring suits for treble damages (i.e. three times as much money in damages as the violation cost them). Over time, the federal courts have developed a body of law under the Sherman Act making certain types of anticompetitive conduct per se illegal, and subjecting other types of conduct to case-by-case analysis regarding whether the conduct unreasonably restrains trade.

The law attempts to prevent the artificial raising of prices by restriction of trade or supply. "Innocent monopoly", or monopoly achieved solely by merit, is perfectly legal, but acts by a monopolist to artificially preserve that status, or nefarious dealings to create a monopoly, are not. The purpose of the Sherman Act is not to protect competitors from harm from legitimately successful businesses, nor to prevent businesses from gaining honest profits from consumers, but rather to preserve a competitive marketplace to protect consumers from abuses.

Standard Oil

Standard Oil Co. Inc. was an American oil producing, transporting, refining, and marketing company and monopoly. Established in 1870 by John D. Rockefeller and Henry Flagler as a corporation in Ohio, it was the largest oil refinery in the world of its time. Its history as one of the world's first and largest multinational corporations ended in 1911, when the U.S. Supreme Court ruled, in a landmark case, that Standard Oil was an illegal monopoly.

Standard Oil dominated the oil products market initially through horizontal integration in the refining sector, then, in later years vertical integration; the company was an innovator in the development of the business trust. The Standard Oil trust streamlined production and logistics, lowered costs, and undercut competitors. "Trust-busting" critics accused Standard Oil of using aggressive pricing to destroy competitors and form a monopoly that threatened other businesses.

Rockefeller ran the company as its chairman, until his retirement in 1897. He remained the major shareholder, and in 1911, with the dissolution of the Standard Oil trust into 34 smaller companies, Rockefeller became the richest man in the world, as the initial income of these individual enterprises proved to be much bigger than that of a single larger company. Its successors such as ExxonMobil or Chevron are still among the companies with the largest income worldwide. By 1882, his top aide was John Dustin Archbold. After 1896, Rockefeller disengaged from business to concentrate on his philanthropy, leaving Archbold in control. Other notable Standard Oil principals include Henry Flagler, developer of the Florida East Coast Railway and resort cities, and Henry H. Rogers, who built the Virginian Railway.

State capitalism

State capitalism is an economic system in which the state undertakes commercial (i.e. for-profit) economic activity and where the means of production are organized and managed as state-owned business enterprises (including the processes of capital accumulation, wage labor and centralized management), or where there is otherwise a dominance of corporatized government agencies (agencies organized along business-management practices) or of publicly listed corporations in which the state has controlling shares. Marxist literature defines state capitalism as a social system combining capitalism with ownership or control by a state—by this definition, a state capitalist country is one where the government controls the economy and essentially acts like a single huge corporation, extracting the surplus value from the workforce in order to invest it in further production. This designation applies regardless of the political aims of the state (even if the state is nominally socialist) and some people argue that the modern People's Republic of China constitutes a form of state capitalism and/or that the Soviet Union failed in its goal to establish socialism, but rather established state capitalism.The term "state capitalism" is also used by some in reference to a private capitalist economy controlled by a state, often meaning a privately owned economy that is subject to statist economic planning. This term was often used to describe the controlled economies of the Great Powers in the First World War. State capitalism has also come to refer to an economic system where the means of production are owned privately, but the state has considerable control over the allocation of credit and investment as in the case of France during the period of dirigisme after the Second World War. State capitalism may be used (sometimes interchangeably with state monopoly capitalism) to describe a system where the state intervenes in the economy to protect and advance the interests of large-scale businesses.

Libertarian socialist Noam Chomsky applies the term "state capitalism" to economies such as that of the United States, where large enterprises that are deemed "too big to fail" receive publicly funded government bailouts that mitigate the firms' assumption of risk and undermine market laws and where the state largely funds private production at public expense, but private owners reap the profits. This practice is often claimed to be in contrast with the ideals of both socialism and laissez-faire capitalism.There are various theories and critiques of state capitalism, some of which existed before the 1917 October Revolution. The common themes among them identify that the workers do not meaningfully control the means of production and detect that commodity relations and production for profit still occur within state capitalism. In Socialism: Utopian and Scientific (1880), Friedrich Engels argued that state ownership does not do away with capitalism by itself, but rather would be the final stage of capitalism, consisting of ownership and management of large-scale production and communication by the bourgeois state. He argued that the tools for ending capitalism are found in state capitalism.

State monopoly

In economics, a government monopoly (or public monopoly) is a form of coercive monopoly in which a government agency or government corporation is the sole provider of a particular good or service and competition is prohibited by law. It is a monopoly created by the government. It is usually distinguished from a government-granted monopoly, where the government grants a monopoly to a private individual or company.

A government monopoly may be run by any level of government - national, regional, local; for levels below the national, it is a local monopoly. The term state monopoly usually means a government monopoly run by the national government, although it may also refer to monopolies run by regional entities called "states" (notably the U.S. states).

TTM Thailand Tobacco Monopoly F.C.

Thailand Tobacco Monopoly Football Club (Thai: สโมสรฟุตบอลยาสูบ), commonly known as the TTM FC, was a Thai football club originally based in Bangkok. The Club, founded in 1963, was one of the oldest clubs in Thailand. Their biggest achievement was winning the Thai Premier League title in 2005.

The club was subject to a number of renamings and moves from 2009: first to TTM Samut Sakhon F.C, then to TTM Phichit for the 2010 season, whereupon the team re-located to the Northern province. In 2012 the club once again relocated to Chiang Mai and would be known as TTM Chiangmai. In 2013 they moved to Lopburi, then in 2014 they returned to their original home of Bangkok. In 2015 they finished 19th and were relegated to the Regional League. The club was dissolved in 2015.

Vertical integration

In microeconomics and management, vertical integration is an arrangement in which the supply chain of a company is owned by that company. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need. It is contrasted with horizontal integration, wherein a company produces several items which are related to one another. Vertical integration has also described management styles that bring large portions of the supply chain not only under a common ownership, but also into one corporation (as in the 1920s when the Ford River Rouge Complex began making much of its own steel rather than buying it from suppliers).

Vertical integration and expansion is desired because it secures the supplies needed by the firm to produce its product and the market needed to sell the product. Vertical integration and expansion can become undesirable when its actions become anti-competitive and impede free competition in an open marketplace. Vertical integration is one method of avoiding the hold-up problem. A monopoly produced through vertical integration is called a vertical monopoly.

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