What is 'Monopolist'

A monopolist is an individual, group or company that controls all of the market for a particular good or service. A monopolist probably also believes in policies that favor monopolies since it gives them greater power. A monopolist has little incentive to improve their product because customers have no alternatives. Instead, their motivation is focused on protecting the monopoly.

BREAKING DOWN 'Monopolist'

Monopolies exists when a monopolist becomes the only supplier of a particular product or service. This is different from a monopsony, which refers to a single entity's sole power to purchase a good or service. It is also different from an oligopoly, which consists of a few sellers dominating a market. 

The hallmark of a monopoly is a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller's marginal cost that leads to excessive profit.  

In economics, a monopoly is a single seller. However, according to the law, a monopoly only needs to be a business entity that has significant market power – enough power to charge overly high prices. Although monopolies may be big businesses, size is not a required characteristic of a monopoly. A small business may still have the power to raise prices in a small industry. Monopolies can be established by a government, form organically or form by the merger of formerly independent companies or organizations.

In many jurisdictions, such as the United States, there are laws restricting monopolies. Being the sole or dominant player in a market is often not illegal in itself. However, certain categories of monopolistic behavior can be considered abusive in a free market, and such activities will often attract the monopoly label and legal sanctions to go with it. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic interest group. Patents, copyrights and trademarks are sometimes used as examples of government-granted monopolies. a government may also reserve a venture for itself and form a government monopoly.

Characteristics of a True Monopolist

  • The primary concern of a monopolist is to maximize profits at all costs.
  • A monopolist will have the power to arbitrarily decide the price of the good or product to be sold. Usually this decision is made in such a way that keeps prices as high as possible while satisfying demand.
  • Other sellers are unable to go into business within the territory of a monopolist.
  • In a monopoly, the whole market is being served by a single company, and for practical purposes, the company is the same as the industry.
RELATED TERMS
  1. Monopoly

    A monopoly is a situation in which one corporation, firm or entity ...
  2. Natural Monopoly

    A natural monopoly is the domination of an industry or sector ...
  3. Franchised Monopoly

    A franchised monopoly is a company sheltered from competition ...
  4. Legal Monopoly

    A legal monopoly is a company that is operating as a monopoly ...
  5. Monopolistic Competition

    Monopolistic competition characterizes an industry in which many ...
  6. Monopolistic State Fund

    A monopolistic state fund is a government owned and operated ...
Related Articles
  1. Insights

    How and Why Companies Become Monopolies

    Without competition, monopolies can raise prices and lower quality, leaving consumers little choice. But monopolies can benefit consumers as well.
  2. Small Business

    How Monopoly Antitrust Laws Affect Consumers

    Monopolies often receive a negative reception, but sometimes they can benefit consumers.
  3. Investing

    New Monopoly Edition Ditches Paper Money (HAS)

    Hasbro's latest version of Monopoly speeds up the classic game and reflects our movement towards a cashless society. It will still probably end friendships over the "free parking" rule, though.
  4. Small Business

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  5. Insights

    A Short History of the US Federal Trade Commission

    Since the early 1900s, the Federal Trade Commission has preventing anticompetitive, deceptive, and unfair business practices.
  6. Small Business

    What are antitrust laws?

    Learn about antitrust laws or "competition laws." These statutes protect consumers from predatory business practices by ensuring fair competition exists.
  7. Small Business

    Entrepreneurs Make Money: Why, How, Where & When

    There are many characteristics to an entrepreneur and how they make their money. Learn how it's done, where and when Entrepreneurs make money.
  8. Insights

    Understanding a Free Market Economy

    Why would we want a free market economy?
  9. Investing

    Facebook and Google’s Days Are Numbered: Soros

    The tech giants, who "deliberately engineer addiction," would be tempted to "compromise themselves" to enter foreign markets where they have been banned.
RELATED FAQS
  1. What are Common Examples of Monopolistic Markets?

    Many utilities are monopolistic markets. A monopoly exists when one firm can operate at a lower marginal cost than its competitors. Read Answer >>
  2. Are monopolies always bad?

    Learn why governments sanction some monopolies, such as monopolies over public utilities, and why these monopolies are good ... Read Answer >>
  3. What is the difference between a monopolistic market and perfect competition?

    Learn about monopolistic and perfectly competitive markets, what they are, and the main differences between perfect competition ... Read Answer >>
  4. What are the most famous monopolies?

    Without free market competition, the most famous monopolies in American history effectively set the national price for steel, ... Read Answer >>
  5. Why do utility stocks pay high dividends?

    Learn why utility stocks pay high dividends and how government-produced monopoly protects privileged utility companies from ... Read Answer >>
  6. How does government regulation impact the telecommunications sector?

    Read about the many ways the U.S. government regulates the telecommunications industry, including radios, telephones, TV ... Read Answer >>
Trading Center