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Different Facets of Monopoly

Introduction

Monopoly is an important economic concept that is considered as the extreme of capitalism. It forms the basis of the plethora of theoretical discussions surrounding the operations of market. Many believe that this system does not work as there is one provider of a good or service who does not have any incentive to improve to match consumers' demand. Therefore, it is considered undesirable and societies seek to control it by regulation. When monopolies become too powerful, states tend to intervene to regulate it, break up the monopoly, or to convert it into a publicly owned entity.

Interestingly, there is a positive side of monopoly as well. States tend to make use of monopoly to promote innovation when it grants patents. A patent will essentially give its owner a monopoly over a certain product for a fixed period. The reasoning behind granting patents to new inventions is that this will give time to the innovators to recover its research and development cost that generally tend to be quite huge. This is in essence using monopoly to promote innovation.

This paper will focus on the different aspects of monopoly. It will first discuss the theory of monopoly in detail and the, we will progress to discuss how the theory of monopoly is fundamental in explaining how the markets operate. This paper will discuss how the market places have become much more complex and that the overall landscape of the business environment has changed. We will then discuss some of the arguments for and against monopoly in detail.

Discussion

According to Blythe (2006, p. 20), Monopoly is a situation where one company is responsible for supplying to the whole market. Monopoly focuses on competition as one company has the controlling share of the market and therefore can dictate the market. It is the price giver meaning that other small companies have to follow their lead in terms of price and production. This gives the controlling company to set the price that maximizes its profit.

If we analyze in terms of economics, we see that the term monopoly is used to define a persistent market situation in where there is strictly one provider of a good or service. This means that there will be a lack of economic competition for the provider of the good or service and no viable substitute product for consumers to shift.

Effect of Marketing on Monopoly

It is considered that the evolution of marketing has changed the landscape of the markets. In this regard, monopoly was developed before marketing became a distinct discipline and therefore, its basis lies in a time where markets, products, technology, and consumers were different. In essence, monopoly focuses on competition between businesses in terms of size.

Christopher et al. (2002, print) has proposed the six markets model that states that there are six different stakeholders groups with their own set of “markets”. These six different stakeholders are customers, influence, suppliers, internal, recruitment, and referral. The business operates in these ...