What is a Monopoly (concept and definition)

Monopoly It is a situation in the market in which the manufacturing and/or marketing of a product, good or service is in the hands of a single company.

It may be the result of a legal concession, an agreement between merchants or the product of an irregular situation.

It also means ‘hoarding’ or ‘exclusive privilege’ applied in the business field. Comes from Latin monopoly and this one from Greek μονοπώλιον formed by μόνος (monkeys, ‘one’, ‘only’) and πωλεῖν (pollin‘sell’).

Characteristics of a monopoly

A monopoly is characterized by the existence of a only company that markets its products or services in a certain market. Furthermore, the company that exercises a monopoly maximize profitssince there is no real competition in the market.

Another characteristic element is the ability to decide the price of a good, product or service, although sometimes this characteristic is conditioned by concessions or legal measures.

In a monopoly, in addition to the possibility of varying the price, it also has the ability to change quality of the product. A monopoly situation also presents a great difficulty for other companies to access the market.

Examples of monopoly

There are examples of monopoly in various areas of the market. An example of a monopoly in Mexico could be the company PEMEX (Mexican oil).

It is a parastatal organization that has the exclusive power to extract a series of energy resources (mainly oil and gas) in Mexico, having exclusivity for products with great demand in the market.

There are companies that, although they are not considered monopolies, use monopoly practices such as IPeñoles industries wave Federal Electricity Commission (Mexico) or international companies that have been sanctioned for this type of practices such as Microsoft.

Differences between monopoly and oligopoly

The concepts of monopoly and the oligopoly They correspond to two forms of market organization based on the offer of a good, product or service.

In an oligopoly, the production and/or marketing capacity of a product or service is in the hands of a few companies that control the market. In a monopoly, there is only one company.

An oligopoly situation can resemble a monopoly since, although there are several groups that control a certain market, they can distribute it and even set the prices and quality of the products, with these types of practices being punishable in many cases.

An example of an oligopoly can be the mobile telephone market in the United States of America, in which most of the market share is concentrated in four large companies: Verizon, AT&T, Sprint Nextel and T-Mobile.

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