Many businesses accuse other businesses for corrupting the market and of trying create a monopoly on the market. However, what is actually a monopoly? Is it bad, or just a word thrown around by companies trying to accuse each other of something?
Monopoly is state of the market, in which one company or entity controls the whole market. Hence, the monopolistic company set the supply, the costs of the product, etc. The monopolistic company can also inflate or deflate supply and demand as and when it chooses.
A monopoly takes away the competition is the market, which keeps the market balanced and affordable. Imagine a scenario, where the only shoe company in the world is Nike. All the other companies have closed shop and gone bankrupt, or have been bought by Nike. Now the only shoes available to you are Nike. If you want another kind of shoes too bad. If Nike decides to make only purple crocs, you’ll have to wear it, because there are no other types of shoes left. If Nike decides to sell those purple crocs at a $1000 each, you have to buy them or go without shoes. Here, Nike has created a monopoly. Nike controls the entire market and decides what to do with it.
Basically, a monopoly is ‘a situation in which a single company owns all or nearly all of the market for a given type of product or service.’ There could be various aspects that could lead to a monopolistic market, such as vast economies of scale, barriers to entry, or governmental regulation. A monopolistic market is when one company is continued to operate without competition and/or regulation. This kind of market is usually bad for the consumer.
The term monopoly also refers to board game in which players try to buy properties and aim to control as much of the board as possible. Once a player buys a property, he can then charge the other players a rent for landing on the property. The player can also increase the rent of his property by building houses or a hotel on his property. The game ends when one player bankrupts the other players and controls the whole board.