Microeconomics: Theory and Applications with Calculus, 4e

11.4 Causes of Monopolies

Is it right that only one firm sells the game Monopoly?

Why are some markets monopolized? Two key reasons are that a firm has a cost advantage over other firms or a government created the monopoly.8

⁸In Section 11.6, we discuss how network externalities may lead to a monopoly. In later chapters, we discuss three other causes of monopolies. First, the original firm in a market may use strategies that discourage other firms from entering the market (Chapter 13). Second, a merger into a single firm (Chapter 14) of all the firms in an industry creates a monopoly if new firms fail to enter the market. Third, firms may coordinate their activities and set their prices as a monopoly would (Chapter 14). Such a group of firms ...