Definition
Monopoly
A monopoly is a market with a single seller and no close substitutes, giving that firm power to set prices above competitive levels and restrict output.
A monopolist faces the entire market demand and can raise prices by limiting supply, earning excess profit at consumers' expense. Pure monopolies are rare but exist in utilities and where high barriers block entry.
India regulates monopoly power through the Competition Commission of India (CCI), which polices abuse of dominance, anti-competitive deals and unfair pricing. Natural monopolies like power transmission are regulated rather than banned, with tariffs overseen by sector regulators.
Related terms
- OligopolyAn oligopoly is a market dominated by a few large firms whose decisions are interdependent, often leading to price rigidity, tacit coordination or fierce competition.
- MonopsonyA monopsony is a market with a single dominant buyer, giving that buyer power to push prices and wages below competitive levels, the mirror image of a monopoly.
- Monopolistic CompetitionMonopolistic competition is a market with many firms selling differentiated products, each with some pricing power from branding but facing easy entry that erodes long-run profits.
- ExternalitiesAn externality is a cost or benefit of an economic activity that falls on third parties not involved in the transaction, such as pollution (negative) or vaccination (positive).
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.