What is a Monopoly

Monopoly It is a situation in the market in which the manufacture and/or commercialization of a product, a good or a 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 sphere. It comes from the Latin monopolĭum and this from the Greek μονοπώλιον formed by μόνος (monkeys, ‘one’, ‘unique’) and πωλεῖν (pollen‘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. In addition, 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, you also have 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 can be the company PEMEX (Mexican oil).

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

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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 penalized for this type of practice as Microsoft.

Differences between monopoly and oligopoly

The concepts of monopoly and the oligopoly correspond to two forms of market organization based on the supply 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 firm.

An oligopoly situation can resemble a monopoly since, although there are several groups that control a given market, they can share it out and even set the prices and quality of the products, being this type of practice punishable in many cases.

An example of an oligopoly can be the mobile phone 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.