We explain what a monopoly is, its types, characteristics and examples in various countries. Also, differences with an oligopoly.

What is a monopoly?
In economics, the term monopoly is used (composed of the Greek words bun“one”, and pollin“sell”) to designate the situation in which a single producer or seller has complete control of a market being able to impose conditions with impunity, and making the entry of new competitors difficult or impossible.
Monopolies constitute situations of market failure or legal privilege; they are contrary to the idea of free economic competition. For a monopoly to exist, the entire supply must correspond to the same producer, without substitute products. Thus, the consumer must accept the price and production conditions that the monopolist determines, and that respond solely to his convenience.
In general, these types of situations are considered pernicious and impoverish economic activity, which is why many countries have legislation that explicitly prohibits monopoly, or that allows investigations to be carried out to reveal hidden monopolies that may exist.
Characteristics of monopolies
Monopolies are usually characterized by:
- The direct control of a single company over the entire (or almost) market, imposing conditions that benefit only it and guarantee the perpetuity of its power, through the exclusion of potential competitors.
- They allow the concentration of wealth (and therefore economic power) in a single actor, making it increasingly difficult to reverse the situation, given that more money, more power, and more power, more money.
- are contrary to free competition since the monopolistic company is not subject to pressure to improve its products or to compete in any way for the consumer's favoritism, since the consumer has no alternatives.
On the other hand, they can occur in the following ways:
- Trust This term taken from English refers to corporate consortia controlled or owned by a single company, which directs its commercial activity and covers its respective consumer markets.
- Cartels These are formal or informal agreements between companies in the same productive sector, with the aim of reducing or eliminating the rest of the competition, thus constituting central power distributed among them. This usually leads to multiple monopolies, that is, oligopolies.
- Corporate mergers and acquisitions The largest and most powerful companies are often able to buy out their competition, unifying the main economic players in a sector under their command, either openly or through discreet methods.
- State privileges. Formerly known as “seats”, this is the transfer of special privileges to a company by the state, through bidding or through more or less formal negotiations, in order to promote its economic growth. In many cases this involves acts of corruption.
Types of monopoly

The following types of monopoly are usually distinguished:
- Linear price monopoly Also known as pure monopoly, it occurs when there is literally only one company in charge of a commercial niche. It does not usually occur in the real economy, since it is actually a theoretical monopoly, in which there are no price changes, no substitute products, no government intervention of any kind, no margins of uncertainty in the market, and there is a perfect mobility in the factors of production.
- Artificial monopoly This is the name given to monopolies that arise from the intervention of the monopolist or some other fiscal or other means (violence, for example) to prevent products other than their own from reaching the market.
- Natural monopoly In this case, the monopolist monopolizes the market demand, producing at a lower cost than different competing companies would have. Usually this occurs in cases where it is much more efficient for a single company to exist, such as in certain public services, and there are no incentives for the entry of competing companies, which would have to face a risky initial investment.
- Watertight monopoly The cases in which the State assumes the production or sale of a certain good, or grants it to an individual in exchange for tax revenue, are known as watertight. It is common in situations of shock, in which the State must guarantee the continuous production of inputs, for example.
Examples of monopoly
The following are examples of monopoly:
- Facebook's growing monopoly The company behind the social network, which has been buying other popular application companies for smart cell phones, such as Instagram, Whatsapp, FriendFeed, Ascenta and Oculus VR, moving towards becoming a digital social network trust.
- Airport rates in Spain Imposed on airlines by the public company AENA, they allow the monopolistic operation of the company, since it manages all of the Spanish airports and heliports.
- Venezuelan oil extraction For decades it operated in this nation under the figure of the monopoly of the state company, Petróleos de Venezuela (PDVSA), nationalized in the 1970s, removing the transnational companies in the sector from the market.
Monopoly and oligopoly

In strict terms, An oligopoly is a form of monopoly in which few companies have control of the market or an important influence on him. They are usually 4 or 5 firms that can agree to prevent the entry of new competitors, at the same time that they compete with each other in a market in which they are mutually influential.
References
- “Monopoly” on Wikipedia.
- “Monopoly” in Economipedia.
- “Monopoly” (video) in Educatina.
- “Market structures: monopolies” in Policonomics.
- “Monopoly” in Economics Online.
- “Monopoly and competition” in The Encyclopaedia Britannica.