Essay on pure monopoly

Introduction:

In the world of economics, there are aspects of the state of market that exist which somehow brings favourable or unfavourable grounds for trade. The different types of market structures that do exist might influence the way of operation of a market economy e. g. the degree of concentration of sellers in an industry, the degree of product differentiation, and the ease or difficulty with which new sellers can enter the industry, are some of the factors that make me disagree with the aspect of the existence of a monopolized or pure monopoly in consideration of the current market economies.

Definition of pure monopoly

A market in which one company has control over the entire market for a product, usually because of a barrier to entry such as a technology only available to that company in that there is no substitute a part from the existing business.

To clarify on the aspect of lack of the existence of a pure monopoly I will look at some of the market structures which ideologically somehow prove the inexistence of a pure monopoly.

Degree of concentration of sellers in an industry:

Refers to the number of sellers in an industry together with their comparative shares of industry sales.  When there are a large number of sellers and the number of shares in the market is minimal that in real practice one seller won’t be able to make any impact in the market or try to output any existing competitor. This will bring in another concept of ‘ oligopoly’, market situation in which each of a few producers affects but does not control the market. This will somehow dictate how the rivalry among sellers is managed.

Product differentiation and promotion

This is mostly determined by the consumers of these products in the market, whereby some consumers prefer certain products over others. The degree of product differentiation as registered in the strength of buyer preferences ranges from slight to fairly large. The greatest part being infrequently purchased consumer goods, ‘ prestige goods’ i. e. gifts.

Duplicity of aims

The varying market performance makes the individual sellers to intrinsically have two conflicting aims. One is to establish a monopolistic level of price on their commodities with an aim of maximizing their profits, and the fundamental antagonism toward rival sellers and wants to maximize his or her own profits even at the expense of others on the other hand. With these two conflicting aims there is likelihood of their rivals’ reactions being stronger deterrents to independent actions.