The Perfect Monopoly Market

ABSTRACT

Monopoly can be understood in very simple term meaning a market which has only one seller and there are no close substitutes for that seller’s product or service. Sometimes the term “monopoly” is technically referred to the market itself but usually it is referred to the seller who has created monopoly in the market. The single seller is otherwise called as “monopolist”. Monopoly to be really effective in the market should practically have no substitutes for the product or service at all and also there should be no threat of the entry of a competitor into the market. This gives the monopolist a perfect control over the pricing of the product or service. Monopolies are a result of having barriers to entry that inhibit other company’s

As such there are different types of monopoly market, which could be listed as below;

• Perfect monopoly:

Perfect monopoly is also known as absolute monopoly. Here there is just one seller for a product with absolutely no substitutes. There is zero level of competition. However such monopoly is a very rare case.

• Imperfect Monopoly:

The other terms used to refer imperfect monopoly are relative monopoly, simple or limited monopoly. Here there is a single sellerwith no close substitutes. However, the product may have a remote substitute. As such there could be fear of competition to some extent.

• Private Monopoly:

Private monopoly is a situation where in the production is owned, controlled and managed by an individual, private body or an organization.

• Public Monopoly:

When the government owns and controls the production it is called as public monopoly. Government holds the power of control. As it is welfare and service oriented it is also called as 'Welfare Monopoly' e.g. Railways, Defense, postal service

As such the seller is at the liberty to quote the price he feels right. Most of the times the seller charges higher price for the product as he knows his products are produced exclusively by him.

• Consumer exploitation: as there is very little or no completion in a monopolist market, consumers tends to get exploited in terms of higher price, substandard or low quality goods etc. since the consumers have no option but to buy the products offered by the seller.

• Customer dissatisfaction: higher price for the product, low quality goods or services, lack of choice among products leaves the customers dissatisfied.

• Price discrimination: monopoly firms sometimes tend to practice price discrimination by charging different prices to different customers.

• Inferior goods and services: the monopoly firms may end up producing inferior quality goods and services as he very well knows he is the sole producer of the product and the customers would buy it no matter whether the quality is low or substandard.

• Restricted choice for the customers: monopoly does not give customers choice of goods and services as such there is restricted options for them to choose the