There are many sentiments about the meaning of the word monopoly. Yet if reviewed further, monopoly may be good or it may be bad. The term monopoly itself has taken a bad connotation to the point where kindness is rare with it. It is as if the monopolistic behaviour is always considered bad behaviour! Such a misnomer.
According to the Oxford dictionary, the term monopoly means "exclusive control over a good or service in a particular market." Monopoly and exclusive market positions are ambiguous and tend to be more negative terms. So, there is little choice but to make the best possible with the word monopoly.
Nevertheless, there is a way to achieve a monopoly position (exclusivity in the market) that is beneficial to all parties. Monopolistic activities are not one-sided and do not occupy exclusivity in the livelihood of many people. The monopoly that does not regulate the market. Is there something?
How about this example: You are trusted to find a way out in the healing of a disease, where other health experts are already out of hand to cure this incurable disease. For a while, you have an exclusive market position, a monopoly. Such an example is a way to achieve an exclusive position in the market to achieve a monopoly. Being superior to others in providing goods or services. Conversely, it would be judged negatively when using coercive force to prevent others compete effectively or to hold others to develop by force. Because, whatever method you want, you will serve millions of patients and automatically be satisfied with your monopoly, regardless of how your service is allocated.
Monopoly is only bad when they have an unethical business model or biased support from the government, or both. Monopoly is widely viewed as a sentiment in society. However, the monopoly is not as bad as it looks on the outside. This is what people say about monopolies that are not entirely true. As the late Ambrose Winston so skillfully pointed out in his The Chimera of Monopoly (1960), poor monopoly form is almost impossible, the monopoly in the popular sense cannot be achieved except as a coercive force - personal or government - used on their behalf.
Monopoly actually encourages innovation and new technology. Companies in highly competitive markets are struggling to survive and generate profits, so they can not afford to spend time and resources for innovation in their products and technologies, and for research and development. Google is a very relevant example. Do you think Google can invest in newer technologies (wearable computers) in the face of fierce competition form Yahoo and Bing? No!
That way, it is wrong if monopoly can control the business. Yahoo and Bing just stay developing new technology, mentioned above, to overthrow Google's dominance. With the advent of the internet and diversifying other monopolies, other companies are lining up to take the opportunity of the smallest mistake.
This once again explains how the monopoly helps in innovation in the long run. If you just copy the giant to become a giant, you will not go anywhere. You have to create something new to dominate the market. There is no reason to think that new innovations can not fight monopoly. Nokia dominated the global mobile device market throughout the early 2000s, in fact now how Apple occupied the market.
It’s easier to copy a model than to make something new: doing what we already know how to do takes the world from 1 to n, adding more of something familiar. But every time we create something new, we go from 0 to 1. Tomorrow’s champions will not win by competing ruthlessly in today’s marketplace; they will escape competition altogether, because their businesses will be unique. - Peter Theil
But modern monopolies do not work in the same way as their ancestors did. Now, this is not because the current monopolist executive is a better person. Not many people say that Steve Jobs is a good person. So what is the main difference? Modern monopolies today are business platforms and they do not have their supply chains. Instead, it creates economic and social value by building and managing a large network of users. Instead of directly producing or selling their own goods or services, these companies only connect people.
Advantages of Monopoly
- Monopoly avoids duplication and hence avoids wastage of resources. (We have to understand that duplicate and fake products are a real problem in many countries).
- A monopoly enjoys economies of scale as it is the only supplier of product or service in the market. The benefits can be passed on to the consumers.
- Due to the fact that monopolies make lots of profits, it can be used for research and development and to maintain their status as a monopoly.
- Monopolies may use price discrimination which benefits the economically weaker sections of the society.
- Monopolies can afford to invest in the latest technology and machinery in order to be efficient and to avoid competition.
- Source of revenue for the government- the government gets revenue in form of taxation from monopoly firms.
Disadvantages of Monopoly
- Poor level of service.
- No consumer sovereignty. A monopoly market is best known for consumer exploitation. There are indeed no competing products and as a result, the consumer gets a raw deal in terms of quantity, quality and pricing.
- Consumers may be charged high prices for the low quality of goods and services.
- Lack of competition may lead to low quality and out dated goods and services.
Source: Foundation of Economic Education - Ambrose Winston (FEE), Quora, Economichelps, INC (www.inc.com)