Concept of Monopoly-2

In concept of monopoly 1 we discussed the main features of monopoly such as single seller of the commodity, absence of close substitute etc. the concept of monopoly 2 is related to the reasons of emergence of monopoly.

REASONS FOR THE EMERGENCE OF MONOPOLY:

• Grant of the patent rights: patent rights are given to a company/firm when it introduces a new product or a new technology. The government grants a patent certificate for a certain number of years by which the company/firm gets exclusive rights of producing the particular product or the new technology. And hence, no other company can produce that product or use the technology without obtaining the license from the concerned company.

Thus, patents rights offer a kind of monopoly. The period for which a patent right is valid is called patent life.

Example: it is a case of monopoly when an author is given the copyright of his book.

The main idea behind giving patent rights is to encourage discovery and innovation of new products and technologies.

• Licensing by the government: a monopoly market emerges when the government gives a firm the license that is exclusive legal rights to produce a given product or service in a particular area or region.

Example:  till 2000, DELHI VIDYUT BOARD a government body had the exclusive right to distribute electricity in Delhi.

• Forming a cartel: a cartel is a business combination under which firms coordinate their output and price to reap  the benefits of monopoly.

Example: the most famous example of a cartel is OPEC (Organisation of petroleum exporting countries). In 1960, some of the oil rich countries joined hands to form OPEC which tries to manipulate price of petroleum to drive maximum profits. But recently its monopoly was broken by a company based in USA.

Click here for government certifications