Concept in Definition ABC

We are all consumers and we have all kinds of products at our disposal. When choosing a product or service we value the quality and the price of the different proposals of commercial firms.

If we wanted to buy an object that is only marketed by one entity, we would be facing a monopoly situation. The term comes from the Greek (mono means one and polein means to sell). Thus, when there is simply a seller of a product, a monopoly phenomenon is taking place.

It is a concept of the economy and analysts and experts study it because it is a very common practice. In an economy based on free competence, the existence of a monopoly is problematic. In principle, if a company succeeds in eliminating its competitors, it may apply a politics price without any restriction (the competitor is not a rival because it does not exist). Consequently, it is foreseeable that the price will be higher than it would have in a normal competitive situation. Therefore, the consumer he is obliged to consume the product of the monopoly firm and assumes a high price because he has no alternative. The consumer is clearly disadvantaged in the price and, in addition, it is foreseeable that the quality of the product will also decrease, since the absence of competitors allows the sole producer not to worry about the final quality of what offers.

Monopoly is considered to be a market defect, something that should not happen if competition between companies were real and without cheating or hidden tactics. For this reason, some governments and institutions they try to police and prosecute monopoly practices. Some of them are the trust, cartels or mergers, that is, legal strategies to achieve a situation of dominance and power so remarkable that, in practice, they are a monopoly. To combat them or reduce their damages there are antitrust laws.

The monopoly has different schemes and an example is what happens with the price of gasoline in some countries. Competing companies secretly agree on prices and simulate a rivalry that is not real. It is an example of a variant of monopoly: oligopoly (the dominance of a few competitors within a sector).

Monopoly and its variants occur in all capitalist countries. It is very common in certain strategic sectors of the economy ( Energy, transportation, feeding...). It is not easy to fight it, since the concept of free competition of the capitalism it means that a producer can be the best and in a natural way the competitors disappear.