MONOPOLY &

OLIGOPOLY
PRESENTED BY -

SAMSUDDEEN KM
 What are Markets?

A market is where buyers and sellers:

• meet to exchange goods and services
• usually in exchange for money

The market may be in one specific place

Figure 1 The Four Types of Market Structure

Number of Firms?

Many
firms

Type of Products?

One Few Differentiated Identical

firm firms products products

Monopolistic Perfect
Monopoly Oligopoly Competition Competition
(Chapter 15) (Chapter 16) (Chapter 17) (Chapter 14)

• Tap water • Tennis balls • Novels • Wheat

• Cable TV • Crude oil • Movies • Milk

Copyright © 2004 South-Western

A market structure in which
only one Producer or seller
exists for a Product that has
no close substitutes
 FEATURES OF MONOPOLY
Single seller: There is single producer under
Monopoly . So monopoly firm and industry are
identical.
No substitutes: There are no close substitutes for
the product of monopolist.
Absence of competition: There is no
competition for a monopolist product as he is the
only seller ruling the market.
Contd………
Price maker: A monopolist is a price maker and not
price-taker. He can fix his own price policy and
maximize profit.
Inelastic demand curve: A monopoly
firm faces a downward slopping demand curve.
No free entry and exit: The monopolist has no
immediate rivals due to barriers which block the
entry of new firms.
 TYPES OF MONOPOLY
Natural Monopoly: such monopoly
arises due to endowment of resources by nature.
Natural advantages such as climatic condition, good
location, availability of certain minerals etc. creates
natural monopoly.
Legal Monopoly: It is also known as
statutory monopoly. It is given by law.

Pure Monopoly: It is a market in which there is

single seller & large number of buyers . it is
compete negations of competition.
Contd………
Limited Monopoly: When there are few sellers & large
number of buyers then limited monopoly exist.
Public Monopoly : When monopoly is firm is
owned , managed & controlled by government then it is
called as public monopoly.

Simple Monopoly: when monopoly

Charges same price for his commodity from all buyers in the
market then it is called as simple monopoly.
EXAMPLES OF MONOPOLY
The most recent example I can think of is the Microsoft/Netscape
fued. A monopoly is when a corporation corners a market and
makes competition for the same product or services non-viable.

An example would be to say if Comcast was the only cable

television provider in your area. If you want cable, you have no
choice but to go to Comcast and because of this they can charge
anything they want.
 Oligopoly
According to,

In economics ,a situation in which few companies

control the major part of a particular market ………
Oligopoly
Oligopoly is a market form in which a industry is
dominated by small number of sellers.

Oligopoly harms customers.

To break out of such situation, we need to induce
competition.
Features…..
Small no of firms
Interdependence
Advertising and selling costs
Group behavior
Types of oligopoly
Pure oligopoly-where sellers sell almost similar type
of product

Differentiated oligopoly-where firms are in the same

line of business but products may not be absolute
homogeneous
Examples of oligopoly
Supermarkets

Banking industry

Chemicals

Oil

Medicinal drugs

Broadcasting
 Monopoly v/s Oligopoly
MONOPOLY OLIGOPOLY

A monopoly is a market structure in which In an oligopoly, there are only a few firms
there is only one producer/seller for a that make up an industry.
product. In other words, the single
business is the industry.

There is Only one seller There are few sellers

Products are not homogeneous. Products are homogeneous and

heterogeneous.

There is no competition in this type of There is competition among few sellers.

market.

There is no price rigidity & no price stability. There is price rigidity & hence price stability
in the market.
Discrimination of buyers is possible. Discrimination of buyers is not possible.

No competition Market may be collusive or competitive

Abnormal profits in both the time and Profits are high.

period.

Consumer’s choice is limited Consumer’s choice is unlimited.

Desirable market for sellers. Desirable market for buyers.

No need for advertising. Advertising & publicity required.

Monopolies exist because the free market Oligopolies exist only in a free market.
has been choked out.

In a monopoly, the sole provider names its In an oligopoly, the service providers
price, because no one is around to usually set up a friendly competition to try
compete with them. and increase demand for the product type
in general.

A monopoly is one company controlling a An oligopoly is a few companies

certain market, such as the post office. controlling a certain market, such as the
car industry or the oil industry.

It is Independent. High degrees of interdependence is there

between the firms
Conclusion