Natural monopoly- a state of a product market in which satisfying demand in this market is more effective in the absence of competition due to technological features production. Goods produced by subjects of a natural monopoly cannot be replaced in consumption by other goods. As a result, the demand for goods produced by natural monopolies is less dependent on changes in the price of this product than the demand for other types of goods.
A natural monopoly arises due to objective reasons. It reflects a situation where the demand for a given product is best satisfied by one or more firms. The basis of a natural monopoly is the peculiarities of production technologies and consumer services. Here competition is impossible or undesirable. For example, energy supply, telephone services, etc. There are a limited number of businesses in these industries. Therefore, naturally, they occupy a monopoly position in the market.
The main features of a natural monopoly:
1) the legal basis for the establishment, implementation and termination of the regime;
2) the relationship between the legislation on monopolies and the Law “On Competition”, their differentiation through legal regulation;
3) the boundaries of action of the monopoly regimes under consideration by industry and type of business;
4) general legal status subjects of monopolies, the specific nature of their rights and obligations;
5) system for regulating the activities of monopoly entities;
6) sanctions and liability for violation of the provisions of legislation in the relevant area.
Areas of activity of natural monopolies:
1)transportation of oil and petroleum products through main pipelines;
2) gas transportation through pipelines;
3) services for the transmission of electrical and thermal energy;
4) rail transportation;
5) services of transport terminals, ports, airports;
6) public electric and postal communication services.
The monopoly regulatory institutions under consideration are exceptional. From an economic point of view, exclusivity means the removal of certain areas of economic activity from the influence of purely market competitive mechanisms of self-regulation. The establishment of a corresponding monopoly regime means the introduction of a special situation in a separate sector of the economy, which is impossible without any economic and legal grounds. Legal basis and principles of use legal regime monopolies should be designated specifically in a federal legal act, taking into account the restrictive functions of this institution. When preparing such acts, it should be borne in mind that a natural monopoly is determined by objective economic and technological features of production. The activities of natural monopolies cannot be considered as economic activities prohibited in paragraph 2 of Art. 34 of the Constitution of the Russian Federation. After all, the functioning of a natural monopoly is not aimed at monopolization, but at eliminating unfair competition. It is carried out exclusively within the framework of state regulation of market relations and for the purpose of protecting consumers.
Chapter 12. MONOPOLY.
"The intervention of monopolies without any reason
reasons leads to a reduction in production... Monopoly is one of those things that most people are opposed to."
(Paul Samuelson "Economics")
Questions studied
Goals, means and limitations of a firm operating in an imperfectly competitive market.
The nature of monopoly. Types of monopolies. Natural monopolies. Reasons for the emergence of monopolies. Monopolies in the USSR and Russia. Ways to demonopolize the Russian economy.
Mathematical model of monopoly. Monopoly profit. The social cost of monopoly.
Behavior of a monopoly. Price discrimination.
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Goals, means and limitations of the firm in imperfectly competitive markets. The price and output of an imperfect competitor are related: the more goods are produced, the lower their price. That is, the demand curve for the firm's product has a negative slope, and an imperfect competitor is price setter (price finder).
The first factor influencing the choice of price is the elasticity of demand for the company's products. The greater the elasticity of demand for a firm's products, that is, the more dependent potential sales volume is on price changes, the less the firm's market power. Conversely, if the elasticity of demand for a firm's products is small, then the firm has great market power. This is quite consistent with common sense, since the elasticity of demand reflects the availability of substitutes: the more substitutes, the more elastic the demand.
The second factor is costs, namely variable costs. The higher they are, the more you have to raise the price.
The nature of monopoly. A firm is considered to be a monopolist if it acts as the sole seller of a product that has no close substitute. At the same time, access of other manufacturers to the market for this product is often very difficult. This may be due to a patent giving the exclusive right of production to its owner, or to significant financial costs.
Despite its clear definition, the concept of monopoly is controversial. On the one hand, in the real world there is practically no pure monopolies , that is, situations where the entire industry consists of one firm. On the other hand, monopoly power in the market is encountered at every turn. A city may have one power plant, one railroad, one hospital. More than five percent of all goods and services produced by the American economy are produced in near-monopoly markets.
Monopoly as a mass phenomenon in the modern world is connected not only and not so much with the natural development of the industry, when an economically strong competitor displaces or absorbs a weak one. There are relatively few such monopolies. Who can be called a monopolist? The word “monopoly” itself, which comes from two Greek words (“mono” - the only one, “polis” - I sell), gives a fairly accurate answer to the question posed. For example, the seller of a night store, the only one in the entire district, sells at increased prices, realizing his monopoly position at night. Or the price is not announced at all and the convenience store seller, looking you in the eyes, carries out price discrimination, that is, sets the most favorable price for himself, depending on the situation.
Types of monopolies- This competitive monopoly, technological monopoly, artificial monopoly, natural monopoly. There is no exact boundary between them.
Competitive monopoly arises during competition. It is usually represented by large enterprises with the highest productivity and lowest costs. Monopolies of this kind are of a transitory nature due to the same competition.
Technological monopolies. Firms that are leaders in certain areas of scientific and technological progress have a technological monopoly. Unlike a monopoly company that has a patent for a relatively simple invention such as adhesive paper developed by 3M, technological monopolies occupy a stable position. For example, you can have all the patents and licenses for the production of one of the Sukhoi Design Bureau models, but most likely only the Design Bureau itself will be able to produce more and more excellent aircraft models.
Artificial (legal) monopolies are created by the state. An artificial monopoly is stable because it is supported non-economically. It is not necessarily represented by technologically advanced firms. Such monopolies are granted privileges that secure their preferential rights to natural and other resources. Thus, the state allows some and prohibits others. Such was the monopoly on vodka in Russia or the privileges of the East India Company to sell tea in the colonies, granted to it by Great Britain in 1773, which served as the reason for the outbreak of the American Revolution.
Natural monopolies. A local power system, a telephone exchange, or a subway line are all examples of monopolies. It is truly difficult to imagine two parallel subway lines or overlapping telephone networks. These are examples of the so-called natural monopoly, which in some cases is inevitable because it allows society to make the best use of limited resources.
Natural monopolies arise where competition is impossible or economically unfeasible, that is, where competition uses society's resources less efficiently.
A natural monopoly is a situation when, in the production of a certain type of product, a large enterprise turns out to be more efficient compared to several small ones, which together could produce the same volume of products as this enterprise, but at the same time their average costs will be significantly higher than from this company. For example, it is impossible to operate one mine by two companies and it is inappropriate to have duplicate metro lines or power systems.
As a rule, the demand for products or services of natural monopolies is much less dependent on price changes, since they are difficult to replace in use with other goods and services. Let's assume that the consumer can bear the increase in car prices. He will simply refuse to buy for a while own car. But even a significant increase in the price of electricity is unlikely to force him to stop consuming it. As a result, the natural monopolist has the opportunity to set prices significantly higher than its actual production costs. To prevent this from happening, the state must protect the interests of the consumer and enshrine this function at the level of law. Indeed, it is highly undesirable to allow a situation where the energy company demands an increase in fees by threatening to cut off the electricity. It can justify the need to increase tariffs by increasing costs, but does not use force. Of course, her services can be replaced, but not in the short term. Therefore, the state acts as an intermediary in the relationship between the consumer and the natural monopoly, regulating prices and sales volumes, as well as giving subsidies to consumers.
EXAMPLE 12-1. LAW "ON NATURAL MONOPOLY".
In different countries, there is a practice of regulating natural monopolies by special independent agencies, whose activities are based on legislative acts. For example, in the US, telephone companies are regulated by the Federal Communications Commission, in the UK by the Telecommunications Regulatory Office, and in Canada by the Canadian Telecommunications Commission. These agencies are obliged, on the one hand, to ensure the availability of products from natural monopolies to consumers, and on the other, to establish and maintain prices for these products that would ensure the further development of the monopolies themselves.
The Russian list of natural monopolies includes the transportation of oil through main pipelines; gas transportation through pipelines; production of electricity and provision of transmission services; rail transportation; transportation to and within hard-to-reach areas; services of transport terminals, ports, airports; certain types of electrical and postal communications; water supply and sewerage services; air traffic control.
Statistical data indicate the ineffectiveness of sectoral ministries in managing natural monopolies. It is noted that the dynamics of price growth in the industries of natural monopolies constantly significantly outstrips the growth of industrial prices. According to the State Statistics Committee of Russia, the composite index wholesale prices across industries from January 1993 to January 1994 increased 8 times, and electricity tariffs during the same time increased 14 times. Tariffs for heat energy are on average 15 times. Tariffs for railway transport - 19 times.
The cost-based pricing mechanism allowed tariffs to include costs such as fees for excess emissions of pollutants, taxes on wages above established limits, and even fines. As a result, the actual profitability in the energy sector was over 40% of cost and allows about half of the net profit to be used for consumption, payment of dividends, and acquisition of shares in commercial banks.
[Source: Izvestia 07/16/94]
Monopolies don't last forever. They are destroyed and re-emerged as a result of scientific, technological and economic progress. At the beginning of the twentieth century, the telephone network emerged as a natural monopoly. Today, with the development of telephone communications, this is already an oligopoly. Some monopolies are more stable, others less so.
Reasons for the emergence of monopolies. Increasingly, monopoly power in the market is determined entry barriers to enter the market, that is, conditions that make it difficult for “newcomers” to enter an industry dominated by “old-timers”. In addition, mergers are a significant factor in creating monopolies. Let us consider in more detail the reasons for the emergence of monopolies.
1. Natural monopoly arises due to positive economies of scale : The higher the production volume, the lower the average cost. This means that average costs in the long run will be minimal if the industry is represented by only one rather than several competing firms.
2. The government gives the company exclusive rights (issuance of licenses, for example, for cable television, transportation in the north, postal services and similar activities). It does this quite often in order to limit competition in industries where it is more profitable for society to allow a monopoly (this is a situation of natural monopoly). In the short term, such an artificial monopoly may work, but in the long term, competition is irreplaceable.
3. Ownership of irreplaceable and rare resources is also a strong barrier to entry. A classic example is the bargaining power of De Beers in the diamond market. It is possible to transfer long-term leases of mineral deposits to private companies. The same type of market barriers includes the possession of unique human talents (outstanding artists, athletes and even talented entrepreneurs - they all have monopoly power in their field of activity).
4. Copyrights and Patents . A firm whose activities are protected by a patent has the exclusive right to sell licenses for these activities, for example in regions or otherwise defined markets. An author who owns a patent can sell the rights to use his invention or use it himself. In any case, monopoly power remains in the market in one form or another. This type of monopoly is sometimes called closed monopoly , Unlike open monopoly , which does not have protection from competitors in the form of patents or the advantages of a natural monopoly.
5. Cost of entry into the industry , where an open monopoly reigns or the market is shared by a few large firms enjoying the advantage of mass production with significant capital investment already made, is a serious barrier to entry into the industry. In addition to problems with governments and patents, the introduction of cars or aircraft into the market is also hampered by the enormous costs of achieving the competitiveness of a new enterprise.
6. Illegal methods of dealing with potential competitors often prevent new firms from entering the market. Unfortunately, this also happens in Russia.
7. Associations of companies. Merger of companies - This is the main type of association to create monopolies or dominant firms. For example, in 1997, the merger of aviation giants Boeing and McDonald-Douglas led to the creation of a dominant company in the global aircraft market.
A merger of companies can be: horizontal, vertical or conglomerate.
Horizontal merge leads to the merger of two or more companies that produce similar goods or provide similar services, for example, the merger of two publishing houses.
Vertical merge leads to the connection of companies that carry out different stages of one production process. An example of a vertical merger would be where an oil company acquires an oil refinery to produce its own gasoline.
Conglomerate merger results in the merger of two or more completely unrelated companies. An example is the acquisition some time ago of a large supermarket chain by the Volvo automobile concern. Conglomerates allow diversification of production, but make management difficult. They don't always lead to success. The same Volvo in 1997 again became a purely automobile company, selling a chain of supermarkets.
The merger occurs for several reasons. Some companies acquire other firms to change or expand their product lines. Changing a company's products allows it to “reduce risk” or, in other words, protect itself from the possibility of a decrease in demand for certain goods by adding new production facilities. Other firms merge in order to increase production volume and, accordingly, market share. Still others - to reduce costs and for the sake of implementing internal structural changes. Still others unite to implement joint projects. Such mergers benefit both companies and consumers. It is also true that in some cases a merger is a way to reduce or eliminate competition. Antitrust laws aim to discourage such mergers while allowing those that promote operational efficiency and economies of scale.
As an alternative to merger, some companies create joint ventures . In a joint venture, two companies combine some of their resources while maintaining their legal and economic independence. Since the beginning of perestroika, joint ventures between Russian and foreign companies have become very common. Although joint ventures can also be formed by Russian enterprises.
Monopolies in the USSR. In the administrative-command economy of the former Soviet Union, monopolies were a common phenomenon. They can be called administrative monopolies . This fact will have an impact on our economy for a long time. Russian enterprises are on average quite large, and among them there are quite a few giant enterprises. More than half of Soviet industries had a high level of monopolization, since in each of these industries the share of the four largest enterprises (this is the so-called concentration factor ) accounted for over 60% of the total industry production. A lot of products were produced at one single enterprise.
In terms of the number of workers, the average size of industrial enterprises was almost ten times higher than that of similar enterprises in advanced market economies. In 1987, the largest Soviet enterprises (those with 10,000 workers or more) produced 20.2 percent of total industrial output.
The data presented in table 12 -1 illustrate the high level of concentration that was characteristic of the Soviet economy. In fact, a very large part of Soviet enterprises were the only producers of their products. This was especially the case in the engineering sector, where 87 percent of enterprises were the sole producers of their products during this period.
The economy of the “besieged camp” gave rise to a special type of monopoly. The main type of monopoly in the Soviet economy was not a monopoly on the final product, but a monopoly on semi-finished or redistributed products.
Table 12 -1. Distribution of production volume in
USSR by number of producers in 1988
|
Quantity |
Output as a percentage by sector |
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|
produce |
Structure |
Metallur- |
Chemical and forest industry |
government |
social service |
|
7 or more | |||||
About 2,000 enterprises were the only producers of certain types of products. According to the USSR State Statistics Committee, in 1989, out of 340 groups of industrial products, 209 were produced at one enterprise, and 109 - at enterprises that controlled 90 percent or more of the union market. It would seem difficult to imagine a more unfavorable market structure. But that is not all.
Comparative analysis of monopolization of the Russian economy . Let's compare the numbers of large, medium and small enterprises in the USA and Russia. In the United States, enterprises with up to 250 employees make up approximately 98% of the total number of enterprises and employ 27% of workers. In Russia the situation is fundamentally different: 53% and 8.5%, respectively.
Table 12-2. Distribution of the number of firms by number of employees in
manufacturing industry in Russia and the USA, 1993.
In many industries, the US and Russia have similar concentration ratios, but the number of small firms in the US is much higher. In Russia, in a conventional industry, the rest of the output is produced in a few medium-sized enterprises, and in the United States - in countless small firms. It is small businesses that provide the United States with the search for optimal ways of scientific and technological progress and the growth of new jobs. the structure was inherited from the USSR and it is not changing so quickly. In Russia, even after the first ten years of a market economy, there was an “acute shortage” of small enterprises.
Regional and industry segmentation of the market . Russia inherited a high level of market segmentation from the USSR. The historically established trading system (at that time it was called distribution) led by the State Supply Committee and line ministries is as follows. Each trade and supply structure was assigned a region and a set of enterprises. Therefore, there are still few serious competitors in each territorial and industry segment. It is difficult for new wholesale firms to catch up with the fragments of the old monopolists. Strengthening the wholesale chain is one of the real ways to overcome the high monopolization of the Russian economy.
The high level of market segmentation in each region is complemented by the presence of a monopolist carrier. This railways. Their share in the transportation of goods in Russia in 1993 was 96% (in ton-kilometers excluding pipelines), while in the USA it was 50%, and in Western Europe it was 30%. Of course, this is also explained by the vast territory of our country, but not only. The poor quality and shortage of roads has led to the fact that more than 17% of the volume of transportation on railways falls on routes with a length of 100 km.
Monopolies in Russia. The Russian economy has inherited and to some extent retained many features of the Soviet economy, including the high concentration of production in many sectors. Although monopolization in Russia is significant, it is not nearly higher, for example, than in the Czech Republic or Hungary. The real market power of the Russian monopolist is limited not so much by potential competitors and substitute goods, but by the low incomes of enterprises and citizens.
Ways to demonopolize the Russian economy. To change the situation, it is, of course, necessary to increase the number of independent enterprises operating in the market. This can be achieved by working in three directions:
The economy must be open to foreign competition. If this condition is met, the number of enterprises within Russia does not matter much. For example, Fiat and Olivetti are Italy's largest car and computer companies, respectively, but they are not considered monopolies. These companies are exposed to international competition and cannot act as monopolists.
Where it is economically feasible, it is necessary to split up overly large enterprises into a number of smaller firms. A good example are aviation companies. The Soviet airline Aeroflot was the largest in the world, but it was very inefficient and its services were notorious. After privatization it was divided into several companies. Some, such as Transaero, have responded to competitive pressure by offering international services at reasonable prices.
It is necessary to create conditions for the formation of a large number of new enterprises. By operating in competitive markets, these businesses will be able to better meet consumer demand.
Monopoly profit. A monopolist typically earns economic profit or excess profit, which in economic theory is called monopoly profit, due to a reduction in production and the excess of the monopoly price over the price under perfect competition, if for some reason it appeared on the market for a given product. This difference can indeed be considered as monopoly profit, that is, as profit received as a result of the advantages of a monopoly firm over a competitive firm. Since normal profit is included in costs, the economic profit of a competitive firm in the long run is zero, while excess profit, that is, monopoly profit, is positive. Therefore, economists consider this to be one of the obstacles to the market effectively allocating resources, and monopoly profit is considered as losses to society from monopoly .
At the same time, modern science looks at monopoly quite calmly. One reason is the fairly common belief that monopoly is relative and often inevitable. In addition, often the artificial destruction of a monopoly is often irrational, since it is more expensive than the gains from a competitive market. Another reason is that monopolies are often the carriers of scientific and technological progress. In addition, in many cases the excess profits are small and therefore the social losses from the monopoly are not so great.
P 
Monopoly profit
D - demand curve
Fig.12-1. Monopoly profit and comparison of equilibrium in a perfectly competitive market (P C, Q C) and in a monopoly market (P M, Q M) with constant average and marginal costs.
How do you compare monopoly and perfect competition? After all, if a monopolist rules the market, it is difficult to imagine that tomorrow there will be perfect competition. However, this is precisely what suggests economic theory. That is, it is speculatively assumed that the monopoly instantly breaks up into many enterprises, perfect competition arises, and average and marginal costs remain unchanged. In this case, the price in a monopoly market is higher and sales volume is lower than in a perfectly competitive market (see Figure 12-1). Note that the last assumption about the invariance of AC and MC is questionable, since, as a rule, costs are lower in large enterprises than in small enterprises.
Monopoly profit is determined by the difference between TR and TC at the point of equality MR=MC. In the figure, monopoly profit is equal to the area of the rectangle M 1, M 2, P m, AC m. A brief explanation of this complex model is as follows. Maximum profit for any firm in any market is achieved at the point where MR=MC. This means that the best output of the monopolist is Q m. In this case, the average costs will be AC m, and the price will reach P m. Compared to the zero profit of a competitive firm received at point O, the monopolist has an increase of
P m = (P m - AC m)Q m. (12.1)
This is monopoly profit (see Figure 12-1).
Monopoly is the absolute dominance in the economy of a sole producer or seller of products
Definition of monopoly, types of monopolies and their role in the development of the market economy of the state, state control over the pricing policy of monopolists
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Monopoly is the definition
Monopoly is
Subject of natural monopoly
The subject of a natural monopolist is a business entity ( entity) any form of ownership (monopoly formation) that produces or sells goods on a market that is in a state of natural monopolist.
These definitions are based on a structural approach; competition in some cases can be considered as an inappropriate phenomenon. The subject of a natural monopolist is only legal face carrying out economic activities. Natural monopoly and state monopoly are different concepts that should not be confused, since the subject of a natural monopolist can function based on any form of ownership, and a state monopoly is characterized, first of all, by the presence of state property rights.
Monopoly is
The areas of activity of natural monopoly entities are: transportation of black gold and petroleum products by pipelines; transportation of natural and oil gas by pipelines and its distribution; transportation of other substances by pipeline transport; transmission and distribution of electrical energy; use of railway tracks, dispatch services, stations and other infrastructure facilities that ensure the movement of public railway transport; air traffic control; public connection.
"Silvinit" and " Uralkali» are the only potassium producers in Russian Federation. Both companies are located in Perm region and are developing one deposit - Verkhnekamskoye. Moreover, until the mid-1980s they constituted a single enterprise. Potash fertilizers are in high demand on the world market due to limited offers, and the Russian Federation contains 33 percent of the world's potash ore reserves.
Monopoly is
In accordance with the general direction of introducing state regulation of the activities of natural monopolists, the responsibilities of natural monopolists are legally established:
Stick to established order pricing, standards and indicators of product safety and quality, as well as other terms and conditions of implementation entrepreneurial activity, defined in licenses to carry out business activities in the areas of natural monopolies and related markets;
Monopoly is
Maintain separate accounting records for each type of activity that is subject to licensing; - ensure the sale of goods (services) produced by them to consumers on non-discriminatory terms,
Do not create obstacles to the implementation of agreements between producers operating in adjacent markets and consumers;
Submit to the bodies regulating their activities the documents and information necessary for these bodies to fulfill their powers, in the amounts and within the time limits established by the relevant bodies;
Provide officials of bodies regulating their activities with access to documents and information necessary for these bodies to exercise their powers, as well as to facilities, equipment, land plots owned or used by them.
Monopoly is
In addition, subjects of natural monopolies cannot commit acts that lead or may lead to the impossibility of producing (selling) goods that are regulated in accordance with the law, or to replacing them with other goods that are not identical in consumer characteristics.
Monopoly
The issue of pricing requires special attention. politicians monopolistic entities. The latter, as mentioned above, using their monopolistic position, have the opportunity to influence prices and sometimes even set them. As a result, it appears new variety prices - a monopoly price, which is set by an entrepreneur occupying a monopoly position in the market, and leads to restriction of competition and violation of the rights of the acquirer.
Monopoly is
To this it should be added that this price is designed to obtain excess profits, or monopolistic profits. It is in price that the profit of a monopoly position is realized.
The peculiarity of the monopoly price is that it deliberately deviates from the real market price, which is established as a result of the interaction of demand and offers. The monopoly price is upper or lower depending on who forms it - a monopolist or a monopsonist. In both cases, the profit of the latter is ensured at the expense of the purchaser or small producer: the first overpays, and the second does not receive the part of the goods due to him. Thus, the monopoly price is a certain “tribute” that society is forced to pay to those who occupy a monopoly position.
Distinguish between monopoly high and monopoly low prices. The first is established by a monopolist who has occupied the market, and the acquirer, deprived of an alternative, is forced to put up with it. The second is formed by a monopolist in relation to small producers, who also have no choice. Consequently, the monopoly price redistributes goods between economic entities, but such a redistribution that is based on non-economic factors. But the essence of the monopoly price is not limited to this - it also reflects the economic advantages of large-scale, high-tech production, ensuring the production of super-excess goods.
Monopoly is
The monopoly price is the upper price for which a monopolist can sell a product or service and which contains the maximum. However, as experience shows, it is impossible to maintain such a price for a long time. Excess profits, like powerful magnet, attract other businessmen into the industry, who as a result “break” the monopoly.
It should also be taken into account that a monopoly can regulate production, but not demand. Even she is forced to take into account the reaction of buyers to price increases. Only a product for which there is inelastic demand can be monopolized. But even in such a situation, the rise in price of products leads to a restriction of its consumption.
Monopoly is
The monopolist has two options: either use a small one to keep the price high, or increase the volume of sales, but at reduced prices.
One of the options for price behavior in oligopolistic markets is “price leadership.” The existence of several oligopolists, it would seem, should entail competition between them. But it turns out that in the form of price competition it would only lead to general losses. Oligopolists have a common interest in maintaining uniform prices and avoiding “price wars.” This is achieved through an unspoken agreement to accept the prices of the leading company. The latter is, as a rule, the largest organization that determines the price of a particular product, while the rest of the organizations accept it. Samuelson defines that “companies silently develop a line of behavior that excludes intense competition in the price industry.”
Other pricing options are possible politicians, not excluding direct agreements between monopolists. natural monopolies are under state control. The government constantly checks prices, sets maximum limits, based on the need to ensure a certain level of profitability of the organization, development opportunities, etc.
Demand for the monopolist's product and monopoly
A company has monopoly power when it has the ability to influence the price of its product by changing the quantity it is willing to sell. The extent to which a monopolist can exploit its monopoly power depends on the availability of close substitutes for its product and its share of the given market. Naturally, in order to have monopoly power, a firm does not need to be pure monopolist.
Monopoly is
Moreover, it is necessary that the demand curve for the company’s products be inclined downward, and not be horizontal, as for competitive organization, since otherwise the monopoly will not have the opportunity to change the price by changing the quantity of the product offered.
In the extreme, limiting case, the demand curve for the product sold by a pure monopolist coincides with the downward sloping market demand curve for the product sold by the monopolist. Therefore, the monopolist takes into account the reaction of buyers to price changes when setting the price for its product.
The monopolist can set either the price of his product or the quantity of it offered for sale at any given price. period time. And once he has chosen the price, the required quantity of the product will be determined by the demand curve. Similarly, if a monopolist company chooses as a set parameter the quantity of a product it supplies to the market, then the price that consumers will pay for this quantity of the product will determine the demand for this product.
The monopolist, unlike a competitive seller, is not the recipient of the price, and on the contrary, he himself sets the price in the market. A monopoly can choose a price that maximizes it and let consumers choose how much to buy of a given product. An organization decides how many goods to produce based on information about the demand for her product.
Monopoly is
In a monopolized market, there is no proportional relationship between price and quantity produced. The reason is that the monopoly's output decision depends not only on marginal cost but also on the shape of the demand curve. Changes in demand do not lead to proportional changes in price and supply, as does the supply curve for a freely competitive market.
Instead, changes in demand may cause prices to change while output remains constant, changes in output may occur without a change in price, or both price and output may change.
The influence of taxes on the behavior of a monopolist
Since the tax increases marginal cost, the marginal cost curve MC will shift to the left and up to position MC1, as shown in the figure.
The organization will now maximize its profit at the intersection of P1 and Q1.
Influence tax on the price and production volume of a monopolist firm: D - demand, MR - marginal profit, MC - marginal costs without accounting tax, MS - maximum flow rate s taking into account tax
The monopolist will reduce production and increase price as a result of the tax.
The effect of a tax on the monopoly price thus depends on the elasticity of demand: the less elastic the demand, the more the monopolist will increase the price after introducing the tax.
Monopolistic competition
Monopolistic competition is a common type of market that is closest to perfect competition. The ability for an individual company to control price (market power) is negligible.
Let us note the main features characterizing monopolistic competition:
There are a relatively large number of small firms on the market;
These organizations produce a variety of products, and although each company's product is somewhat specific, the buyer can easily find substitute products and switch his demand to them;
Entry of new firms into the industry is not difficult. To open a new vegetable shop, atelier, or repair shop, no significant initial capital is required. Economies of scale also do not require the development of large-scale production.
The demand for the products of firms operating in conditions of monopolistic competition is not completely elastic, but its elasticity is high. For example, the sportswear market can be classified as monopolistic competition. Adherents of the Reebok organization's sneakers are willing to pay a higher price for its products than for sneakers from other companies, but if the price difference turns out to be too significant, they will always find analogues from lesser-known companies on the market at a lower price. The same applies to products from the cosmetics industry, clothing, medicines, etc.
The competitiveness of such markets is also very high, which is largely due to the ease of access of new firms to the market. Let us compare, for example, the washing powder market.
Difference between pure monopoly and perfect competition
Imperfect competition exists when two or more sellers, each with some control over price, compete for sales. This happens when the price is determined by the market share of individual firms. in such markets, each produces a large enough portion of the good to significantly influence supply, and hence prices.
Monopolistic competition. occurs when many sellers compete to sell a differentiated product in a market where new sellers may enter.
Monopoly is
The product of each company trading on the market is an imperfect substitute for the product sold by other firms.
Each seller's product has exceptional qualities and characteristics that cause some buyers to choose his product over a competitor's product. product means that the item sold on the market is not standardized. This may occur due to actual qualitative differences between products or due to perceived differences that stem from differences in advertising, prestige trademark or “image” associated with the possession of this product.
Monopoly is
There are a relatively large number of sellers in a market, each of whom satisfies a small, but not microscopic, share of the market demand for a common type of product sold by the company and its competitors.
Sellers in the market do not take into account the reactions of their rivals when choosing what price to set for their goods or when choosing targets for annual sales.
This feature is a consequence of the relatively large number of sellers in a market with monopolistic competition. that is, if an individual seller reduces the price, then it is likely that the increase in sales volume will occur not at the expense of one organization, but at the expense of many. As a result, it is unlikely that any individual competitor will incur significant losses in market share due to a reduction in the selling price of any individual company. Consequently, competitors have no reason to respond by changing their policies, since the decision of one of the firms does not significantly affect their ability to make profits. The organization knows this and therefore does not consider any possible reaction from competitors when choosing its price or sales target.
With monopolistic competition, it is easy to start a company or leave the market. Profitable market conditions in a market with monopolistic competition will attract new sellers. However, entry into the market is not as easy as it was under perfect competition, since new sellers often have difficulty with their new brands and services.
Consequently, established organizations with established reputations can maintain their advantage over new producers. Monopolistic competition is similar to a monopolist situation because individual companies have the ability to control the price of their goods. She also looks like perfect competition, because each product is sold by many firms, and there is free entry and exit in the market.
Monopoly in a market economy
Monopolists, unlike competitive markets, fail to allocate resources efficiently. Volume money issue Monopolists have less of what is desirable for society, and as a result, they set prices that exceed marginal costs. Typically, the government responds to the monopolist problem in one of four ways:
Tries to transform monopolized industries into more competitive ones;
Regulates the behavior of monopolists;
Transforms some private monopolists into state-owned enterprises.
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Market and competition have always been the antipodes of monopolism. The market is the only real power, which prevents the monopolization of the economy. Where there was an efficient market mechanism, the spread of monopolies did not go very far. An equilibrium was established when monopoly, coexisting with competition, preserved old forms of competition and gave rise to new ones.
But ultimately, in most countries with developed market systems, the balance between the market and monopolists turned out to be unstable and necessitated an antitrust policy aimed at protecting competition. Thanks to this, large organizations that are able to suppress any germs of competition often prefer to refrain from pursuing a monopoly policy.
As long as monopoly markets exist, they cannot be left without government control. Thus, the elasticity of demand becomes in this situation the only factor, but not always sufficient, limiting monopolistic behavior. For this purpose, an antimonopoly policy is being pursued. Two directions can be distinguished. The first includes forms and methods of regulation, the purpose of which is to liberalize markets. Without affecting the monopoly as such, they aim to make monopolistic behavior unprofitable. These include measures to reduce customs tariffs, quantitative restrictions, improve the investment climate, and support small businesses.
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The second direction combines measures of direct influence on the monopoly. In particular, these are financial sanctions in case of violation of antimonopoly legislation, up to the division of the company into parts. Antimonopoly regulation is not limited to any time frame, but is a permanent state policy.
Economies of monopoly scale
Highly efficient, low-cost production is achieved in the largest possible production environment driven by market monopolization. Such a monopoly is usually called a "natural monopoly." that is, an industry in which long-term average costs are minimal if only one organization serves the entire market.
For example: production and distribution of Natural gas:
Development of deposits is necessary;
Construction of main gas pipelines;
Local distribution networks, etc.).
It is extremely difficult for new competitors to enter such an industry as it requires large capital investments.
The dominant company, having lower production costs, is able to temporarily reduce the price of products in order to destroy the competitor.
In conditions when competitors of the monopoly are artificially not allowed into the market, the monopolist can, without loss of income and market share, artificially restrain the development of production, gaining profit only by increasing prices with a relatively stable number of sales due to the absence of competitors, demand becomes less elastic, that is, price less impact on sales volumes. This leads to inefficiency in the allocation of resources “a net loss to society when significantly less product is produced and higher price than consumers could have at this level of development in a more competitive environment. In a free economy, the excess profits of monopolists would attract new investors and competitors into the industry, seeking to repeat the success of the monopoly.
Monopolies in the labor market
An example of a monopolist in the labor market can be some industry trade unions and unions at enterprises that often put forward demands that were too heavy for the employer and unnecessary for the employees. This leads to business closures and layoffs. A monopolist of this type also cannot do without violence, both state and individual, expressed in legislatively enshrined privileges trade unions at enterprises that oblige all employees to join and pay contributions. In order to fulfill their demands, unions often use violence against those who want to work under conditions that do not suit the union members, or do not agree with their financial or political demands.
Monopolists that arose without violence and without the participation of the state are usually a consequence of the effectiveness of the monopoly in comparison with existing competitors, or they naturally lose their dominant position. Practice shows that in some cases a monopoly arises as a natural reaction of consumers to beneficial features product and/or lower cost than competitors. Each stable monopoly, which arose without violence (including from the state), introduced revolutionary innovations, which allowed it to win the competition, increasing its share both through the purchase and re-equipment of competitors’ production facilities, and through the growth of its own production capacities.
Antimonopoly policy in Russia
The problem of the need for state regulation of natural monopolists was recognized by the authorities only in 1994, when the rise in prices for the products they produced had already had a significant impact on undermining the economy. At the same time, the reformist wing of the government began to pay more attention to the problems of regulating natural monopolies, not so much in connection with the need to stop rising prices in relevant industries or to ensure the use of opportunities price mechanism for macroeconomic policy, and primarily trying to limit the range of regulated prices.
The first draft of the law “On Natural Monopolists” was prepared by employees of the Russian Privatization Center on behalf of the State Committee for Administrative Offenses of the Russian Federation in early 1994. After this, the draft was finalized by Russian and foreign experts and agreed upon with industry ministries and companies (Ministry of Communications, Ministry of Railways, Ministry of Transport, Minatom, Ministry of Nationalities, RAO Gazprom, RAO UES of the Russian Federation, etc.). Many line ministries opposed the project, but the SCAP and the Ministry of Economy managed to overcome their resistance. Already in August, the government sent a draft law agreed upon with all interested ministries to the State Duma.
The first reading of the law in the State Duma (January 1995) did not cause lengthy discussions. The main problems arose at parliamentary hearings and at meetings in State Duma committees, where industry representatives again made attempts to change the content or even prevent the adoption of the project. Numerous issues were discussed: the legality of granting regulatory authorities the right to control the investment activities of companies; on the boundaries of regulation - the legality of regulating activities that do not belong to natural monopolies, but are related to regulated activities; on the possibility of retaining regulatory functions at line ministries, etc.
In 2004, the Federal Antimonopoly Service was created to regulate natural monopolies:
In the fuel and energy complex;
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Federal Service for Regulation of Natural Monopolists in Transport;
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Federal Service for Regulation of Natural Monopolists in the Field of Communications.
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Particular attention was paid to financial indicators gas industry, the opportunity to improve the state budget as a result of increasing taxation of RAO Gazprom and the abolition of privileges for the formation of an extra-budgetary fund, etc.
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According to the Law “On Natural Monopolists”, the scope of regulation includes transportation black gold and petroleum products through main pipelines, gas transportation through pipelines, services for the transmission of electrical and thermal energy, rail transportation, services of transport terminals, ports and airports, public and postal communication services.
The main methods of regulation were: price regulation, that is, the direct determination of prices for consumer goods or the setting of their maximum level.
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Identification of consumers for mandatory service or establishment of a minimum level of provision for them. Regulatory authorities are also charged with monitoring various types of activities of natural monopolistic entities, including transactions for the acquisition of property rights, large investment projects, sale and rental of property.
International monopolies
During the 19th century, the capitalist mode of production rapidly spread throughout the globe. Back in the early 70s of the last century, the oldest bourgeois country, Britain, produced more textiles, smelted more iron, mined more coal than the United States of America, Republic of Germany, France, combined. Britain belonged to the championship in the world index of industrial production and an undivided monopoly on the world market. By the end of the 19th century the situation had changed dramatically. The young capitalist countries have grown their own large ones. By volume industrial production index The United States of America took first place in the world, and Federal Republic of Germany first place in Europe. In the East, Japan is the undisputed leader. Despite the obstacles created by the thoroughly rotten tsarist regime, Russia quickly followed the path of industrial development. As a result of the industrial growth of young capitalist countries Great Britain lost its industrial primacy and monopoly position in the world market.
The economic basis for the emergence and development of international monopolists is the high degree of socialization of capitalist production and the internationalization of economic life.
The iron and steel industry of the United States of America is dominated by eight monopolists, under whose control was 84% of the total production capacity countries by steel; of these, the two largest American Steel Trust and Bethlehem Steel had 51% of the total production capacity. The oldest monopoly in the United States is the Standard Oil Trust.
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Three companies are critical to the automobile industry: General Motors,
Chrysler.
The electrical industry is dominated by two organizations: General Electric and Westinghouse. Chemical industry controlled by the DuPont de Nemours concern, aluminum by the Mellon concern.
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The overwhelming majority of the production facilities and sales organizations of the Swiss food concern Nestlé are located in other countries. Only 2-3% of total turnover comes from Switzerland.
In Great Britain, the role of monopoly trusts especially increased after the First World War. wars, when cartel associations of enterprises arose in the textile and coal industries, in the black metallurgy and in a number of new industries. The English Chemical Trust controls about nine-tenths of the total production of basic chemicals, about two-fifths of all the production of dyes and almost the entire production of nitrogen in the country. He is closely connected with the most important branches of English industry and especially with military concerns.
The Anglo-Dutch chemical and food concern Unilever occupies a dominant position in the market
In the Republic of Germany, cartels have become widespread since the end of the last century. Between the two world hostilities, the country's economy was dominated by the Steel Trust (Vereinigte Stahlwerke), which had about 200 thousand workers and employees, the Chemical Trust (Interessen-gemeinschaft Farbenindustri) with 100 thousand workers and employees, a monopolist in the coal industry, the Krupp cannon concern, and electrical concerns General company.
Capitalist industrialization Japan was carried out during the period when in Western Europe and the USA has already established an industrial capitalism. Dominant position among monopoly enterprises Japan conquered the two largest monopolistic financial trusts - Mitsui and Mitsubishi.
The Mitsui concern had a total of 120 companies with a capital of about 1.6 billion yen. Thus, about 15 percent capital of all Japanese companies.
The Mitsubishi Concern also included oil companies, glass industry organizations, warehouse companies, trade organizations, insurance companies, plantation management organizations (natural rubber cultivation), and each industry accounted for about 10 million yen.
The most important feature modern methods the struggle for the economic division of the capitalist part of the world is the establishment of joint ventures jointly owned by monopolies various countries, is one of the forms of economic division of the capitalist part of the world between monopolists characteristic of the modern period.
Such monopolists included the Belgian electrical engineering Concern Philips and the Luxembourg Arbed.
Later the partners created their branches in the UK, Italy, Federal Republic Germany, Switzerland and Belgium. Thus, this is a new powerful breakthrough into the world market of competing partners, a new round of movement of international capital.
Another well-known example of creating joint ventures is the creation in 1985. Corporation Westinghouse Electric ( USA) and the Japanese organization "" joint company "TVEK" with headquarters in USA.
Among modern monopolistic unions of this type there are agreement with a large number of participants. An example is the agreement on the construction of an oil pipeline, which is planned to run from Marseille through Basel and Strasbourg to Karlsruhe. This union involves 19 concerns from various countries, including the Anglo-Dutch Royal Dutch Shell, the English British Petroleum, the American Esso, Mobile Oil, Caltex, the French Petrophina and four West German concern.
The capitalist industrialization of the world played a big role in the development of the economy of the Russian Federation. It served as an impetus for the development of our own industrial enterprises.
The benefits and harms of monopolies
In general, it is difficult to talk about any social benefit brought by monopolists. However, it is impossible to completely do without monopolists - natural monopolists are practically irreplaceable, because the characteristics of the factors of production they use do not allow the presence of more than one owner, or limited resources lead to the unification of the enterprises of their owners. But even in this case, the lack of competition stifles development over a long period of time. Although both competitive and monopolistic markets have disadvantages, as a rule, competitive market achieves better results in the development of the relevant industry in the long term.
Monopoly is
The monopoly of the economy is a serious obstacle to the development of the market, for which monopolistic competition is more typical. It involves a mixture of monopolist and competition. Monopolistic competition is market situation, when a significant number of small manufacturers offer similar, but not identical products. Each enterprise has a relatively small market share and therefore has limited control over the market price. The presence of a large number of enterprises guarantees that secret collusion, concerted actions of enterprises with the aim of limiting production and raising prices is almost impossible.
The monopolist restricts output and sets higher prices due to its monopoly position in the market, which causes irrational allocation of resources and causes increased income inequality. Monopoly reduces the standard of living of the population. Monopolistic firms do not always use their full capabilities to ensure ( scientific and technological progress). The monopolist does not have sufficient incentives to increase efficiency through scientific and technical progress because there is no competition.
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A monopoly leads to inefficiency when, instead of producing at the lowest possible level of marginal cost, the lack of incentives causes the monopoly to perform worse than a competitive organization could perform.
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MONOPOLY- (monopoly) A market structure in which there is only one seller in the market. We can talk about a natural monopoly if the exclusive position of the monopolist is the result of either the exclusive right to own some... ... Economic dictionary
Monopoly- (monopoly) A market in which there is a single seller (producer). In the case where there is a single seller and a single buyer, the situation is called a bilateral monopoly (see also: ... ... Dictionary of business terms MONOPOLY - MONOPOLY, monopolies, women. (from the Greek monos one and poleo I sell). The exclusive right to produce or sell something (legal, economic). The monopoly of foreign trade is one of unshakable foundations Soviet government policies. Insurance... ... Dictionary Ushakova
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MONOPOLY- (from mono... and Greek poleo sell), 1) the exclusive right of production, trade, fishing, etc., owned by one person, a certain group of persons or the state; in a broad sense, the exclusive right to something. 2) Monopoly in the field... ... Modern encyclopedia
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A natural monopoly arises due to objective reasons. It reflects a situation where the demand for a given product is best satisfied by one or more firms. It is based on the features of production technologies and consumer services. Here competition is impossible or undesirable. An example would be energy supply, telephone services, communications, etc. In these industries there are a limited number, if not a single national enterprise, and therefore naturally have a monopoly position in the market.
The main features of a natural monopoly are the following:
1. The activities of natural monopolies are more efficient in the absence of competition, which is associated with significant economies of scale and high semi-fixed costs. Such areas include, for example, transport. The costs of delivering cargo or transporting one passenger are lower, the more cargo or passengers are transported in a given direction.
2. High barriers to entry into the market, since the fixed costs associated with the construction of structures such as roads, communication lines are so high that the organization of a similar parallel system performing the same functions (road and pipeline construction or laying railway track problematic) is unlikely to pay off.
3. Low elasticity of demand, since the demand for products or services produced by natural monopoly entities is less dependent on price changes than the demand for other types of products (services), since they cannot be replaced by other goods. These products satisfy the most important needs of the population or other industries. Such goods include, for example, electricity. If we assume that rising prices for cars will force many consumers to refuse to purchase their own car, and they will use public transport, then even a significant increase in electricity tariffs is unlikely to lead to a refusal to consume it, since it is difficult to replace it with an equivalent energy carrier.
4. The network nature of the market organization, that is, the presence of an integral system of spatially extended networks through which a certain service is provided, including the presence of an organized network, which requires management and control from a single center in real time.
There are two types of natural monopolies:
a) natural monopolies. The birth of such monopolies occurs due to barriers to competition erected by nature itself. For example, a company whose geologists discovered a deposit of unique minerals and which bought the rights to the land plot where this deposit is located can become a monopolist. Now no one else will be able to use this deposit: the law protects the rights of the owner, even if he ultimately turns out to be a monopolist (which does not exclude regulatory intervention by the state in the activities of such a monopolist).
b) technical and economic monopolies. This can be conventionally called monopolies, the emergence of which is dictated by either technical or economic reasons associated with the manifestation of economies of scale.
For example, it is technically almost impossible (or rather, extremely irrational) to create two sewerage networks in the city, supplying gas or electricity to apartments. It is not always rational to try to lay cables from two competing telephone companies in the same city, especially since they would still have to constantly turn to each other's services when a client of one network calls a client of the other.
The largest-scale monopolies are usually those in energy and transport, where economies of scale particularly encourage an increase in the size of the firm in order to reduce the average cost of producing goods. In reality, this is manifested in the fact that the creation in such industries, instead of one largest monopolist company, of a slightly smaller size can lead to an increase in production costs and, as a result, not to a decrease, but to an increase in prices. And society, naturally, is not interested in this.
NATURAL MONOPOLY
NATURAL MONOPOLY
(natural monopoly) A monopoly based on an overwhelming cost advantage for the firm present in the market. A natural monopoly may exist because it has some unique natural resource, such as a mine with the only known deposits of a particular mineral, or because of past capital investments that would have to be duplicated by a competitor, such as a national electrical system. A natural monopoly should be distinguished from a statutory monopoly, where the position of a firm in the market is based on laws in order to eliminate possible competitors. If the advantage of a firm in the market arises only from its access to the necessary technology, if it is based on the inability of other firms to match its know-how, then this is a natural monopoly, but it is not such if it is based only on exclusive possession of patents.
Economy. Dictionary. - M.: "INFRA-M", Publishing House "Ves Mir". J. Black. General edition: Doctor of Economics Osadchaya I.M.. 2000 .
NATURAL MONOPOLY
an officially recognized inevitable monopoly on the production and sale of goods and services, in relation to which the monopoly is determined either by the natural rights of the monopolist, or by considerations of economic benefit for the entire state and population. Thus, a natural monopoly arises in those areas where copyright is in force, because the author is a monopolist by law. On the other hand, it is beneficial for the state to have unified pipelines, energy networks, and railways. A state monopoly also arises in those areas where its existence is due to considerations of public safety.
Raizberg B.A., Lozovsky L.Sh., Starodubtseva E.B.. Modern economic dictionary. - 2nd ed., rev. M.: INFRA-M. 479 pp.. 1999 .
Economic dictionary. 2000 .
See what "NATURAL MONOPOLY" is in other dictionaries:
A company's monopoly due to its unique position in the market. A natural monopoly occurs in a situation where one company is able to satisfy all market demand for certain goods or services with a lower average... ... Financial Dictionary
- (natural monopoly) A monopoly in which the minimum efficient output is greater than or equal to aggregate demand, as in electricity distribution. IN in general terms monopolies may exist as a result of barriers to... ... Dictionary of business terms
natural monopoly- 1. The state of the commodity market in which satisfying demand in this market is effective in the absence of competition due to technological features of production (due to a significant reduction in production costs per unit of goods... Technical Translator's Guide
NATURAL MONOPOLY- an officially recognized inevitable monopoly on the production and sale of goods and services, in relation to which the monopoly is determined either by the natural rights of the monopolist, or by considerations of economic benefit for the entire state and population... Legal encyclopedia
A market condition in which satisfying demand is more effective in the absence of competition due to technological features of production (due to a decrease in production costs per unit of goods as production volume increases), and... ... Political science. Dictionary.
Natural monopoly- a state of a commodity market in which satisfying demand in this market is more effective in the absence of competition due to technological features of production (due to a significant reduction in production costs per unit of goods as ... ... Official terminology
Natural monopoly- 1. A situation in which the industry producing (selling) goods and services effectively satisfies demand in the absence of competition due to the technological features of production. Its goods (services) have... ... Economic and mathematical dictionary
Natural monopoly- (English natural monopoly) in the Russian Federation, a state of the commodity market in which satisfying demand in this market is more effective in the absence of competition due to the technological features of production (due to a significant reduction in production costs... Encyclopedia of Law
Monopoly (from the Greek μονο (mono) one and πωλέω (poleo) sell) a company (the situation in the market in which such a company operates), operating in the absence of significant competitors (producing goods (s) and/or providing services that do not have loved ones... Wikipedia
A state-recognized monopoly on the production and sale of goods and services. It arises where monopoly is naturally determined (for example, the scope of copyright law), beneficial to the state and the entire population (for example, pipeline and... ... encyclopedic Dictionary
