Monopoly definition: when one seller holds the whole market

Monopoly definition in three uses

1. In economics: a market with only one seller and no close substitutes, where it is hard for new firms to enter.
2. The company itself: "The town's only cable provider is a monopoly."
3. Figurative: exclusive possession or control of anything, often in the negative: "Teachers do not have a monopoly on patience."

In real life a perfect monopoly is rare. Economists and regulators often speak of monopoly power or market dominance when one firm holds a very large share, even if a few small rivals exist.

Kinds of monopoly

• Natural monopoly: when one supplier can serve a whole area more cheaply than several could, because building duplicate networks would be wasteful. Water pipes, power lines and rail tracks are typical examples.
• Legal or government-granted monopoly: the law gives one party exclusive rights. A patent gives an inventor a time-limited monopoly on an invention; some countries reserve postal or rail services to a state body.
• Resource monopoly: one firm owns the key raw material, such as the only mine for a rare mineral.
• Monopoly built by scale or network effects: a service becomes more useful the more people use it, so users gather around one provider.

A quick worked example

That is the monopoly problem in miniature. With no competitor to win customers away, the seller faces less pressure to keep prices low, improve service or innovate. Supporters of some monopolies reply that a single provider can be efficient, especially for networks like water, if it is well regulated.

Why governments regulate monopolies

Most countries have competition laws (called antitrust laws in the US) that do not usually ban a company simply for being the biggest. What they target is abuse of dominance, such as unfair pricing, blocking rivals from a market or forcing buyers to purchase bundles, along with mergers that would remove competition. In India this work is done by a national competition regulator; in the US by federal agencies and courts; the European Union has its own rules.

People disagree about how strict these rules should be. Some argue that large firms bring lower costs and better products; others argue that too much concentration harms consumers, workers and small businesses. These debates sit at the heart of discussions about capitalism and markets.

Monopoly, duopoly, oligopoly and monopsony

Do not confuse oligopoly with oligarchy, which describes power held by a handful of wealthy or well-placed people rather than a market shape.

Using the word in sentences

• For years the state company held a monopoly on long-distance phone calls.
• Regulators blocked the merger, saying it would create a near monopoly in baby food.
• My brother tries to monopolize the TV remote every Sunday.
• She reminded the panel that no single country has a monopoly on talent.
• The drug maker's monopoly ended when its patent expired and cheaper versions appeared.

Common pairings: hold a monopoly on or over, break up a monopoly, a state monopoly, a virtual monopoly, monopoly pricing.

Origin: "selling alone"

The term reached English in the 1530s through Latin monopolium from Greek monopolion, the right of exclusive sale, built from monos, alone, and polein, to sell. Its first English sense was exclusive control of a trade or commodity, which is still the core today. Neighbouring market vocabulary is collected on the business and finance page.