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Market structure - Coggle Diagram
Market structure
Monopoly
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Characteristics
Single or dominant sole supplier, high barriers to entry and exit, profit maximising, no close substitutes, large sunk costs and economies of scale, ability to price discriminate
Efficiency
Monopolies are likely to be productively and allocatively inefficient, and will produce less than the equilibrium quantity, leading to welfare loss.
Costs
Firms
Low incentive to cut costs (diseconomies), innovate, improve productive or alloctive efficiency plus tackle x-inefficiency make incumbent monopoly vulnerable to attack (creative destruction). Principal-agent problem- reduces possible profits to be made.
Attracting regulatory investigations - fines and forced demergers
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Benefits
Firms
Increased profits from higher prices and restrictive choices, economies of scale, dynamic efficiency, political power through regulatory capture, higher levels of investment
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Employees
More profits means higher wages and more job security, as well as opportunities for advancement