What is a monopoly

monopoly

(Cournot point).


Monopoly. Pricing in a monopoly
Market form in which only one supplier (monopoly) faces many small buyers on the supply side (supply monopoly). If there are few customers on the demand side compared to a provider, there is a limited monopoly. A bilateral (bilateral) monopoly is used when a supplier is facing a customer.

The monopolist is unrivaled as a sole supplier and is therefore able to either fix the sales volume or to determine the prices. If the monopolist brings a fixed quantity of goods onto the market, a certain price arises from the demand. If the monopolist sets the price for his goods (price fixer), the consumers only have the option of deciding which amount of goods they buy (quantity adjustor). The amount that is bought by the demanders depends on the price of the monopoly. When prices are low, the demand for such goods will increase, and when prices are high, consumers will buy less accordingly. The monopolist will offer the quantity of goods with which he achieves the greatest possible profit, i.e. increase his production as long as the revenues that are achieved for an additionally manufactured unit of goods (marginal revenues) are greater than the additional costs (marginal costs). The greatest possible profit is achieved when the revenue that an additionally produced unit of goods brings in corresponds to the additional costs that it causes (Cournot point).

In practice, companies usually do not take full advantage of a monopoly to raise prices, as unilaterally set, excessive prices would attract potential competitors who then manufacture the same or similar goods in order to benefit from this market. In addition, in many countries legally established abuse control ensures that companies with great market power do not abuse it.

Duden Wirtschaft from A to Z: Basic knowledge for school and study, work and everyday life. 6th edition. Mannheim: Bibliographisches Institut 2016. Licensed edition Bonn: Federal Agency for Civic Education 2016.