Intelsat was a government franchise that was granted a monopoly on satellite communications, a monopoly that ultimately proved quite lucrative. The most common source is to be granted a monopoly by the government, either through patents-in which case the monopoly is temporary-or through a government franchise. There are three basic sources of monopoly. Porsche has a small share of the automobile market-or even the high-end automobile market-but still has monopoly power in that market. Air dominated air traffic to Philadelphia and Pittsburgh but still lost money. This behavior of rivals is the subject of the next chapter.Ī large market share is not proof of a monopoly, nor is a small market share proof that a firm lacks monopoly power. The theory of monopoly is applicable to such firms, although they may face an additional and important constraint: A price increase may affect the behavior of rivals. Some distinguish the terms by whether they are “large” or not others by how long the price increase can be sustained. Both terms require downward sloping demand and usually some notion of sustainability of sales. These terms are used somewhat differently among authors.
or monopoly power, which means that they can increase their price above marginal cost and sustain sales for a long period of time. However, many firms have market power The ability to increase their price above marginal cost and sustain sales for a long period of time. Microsoft has a great deal of market power, but a small percentage of personal computer users choose Apple or Linux operating systems.
post office has a monopoly in first-class mail but faces competition from FedEx and other express-mail companies, as well as from fax and e-mail providers. is a firm that faces a downward sloping demand and has a choice about what price to charge-without fearing of chasing all of its customers away to rivals. A monopoly A firm that faces a downward sloping demand and has a choice about what price to charge.
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