Sources of Monopoly Power

Monopoly power

It refers to the ability of a seller to control price by varying quantity.

In general, the smaller is the elasticity of the demand faced by the firm, the greater is the monopoly power.

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Sources of monopoly power

The ability of a monopolist to control price comes mainly from the following:

      Closed market

The market is closed such that the potential competitors are blocked to compete with the existing sellers.  The sellers in such a market is a closed-market monopolist.

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      Information-transaction costs / Non-standardized products

If the quality of the products from different sellers are not uniform (or if the buyers hold such a belief because of information-transaction costs), a seller may then charge a higher price without losing all customers.  Sellers in this market are called open-market monopolists. 

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<1> Introduction
<2> Sources of monopoly power
<3> Uniform pricing & monopoly rent
<4> Price discrimination
>Intrduction
>First Degree
>Third Degree
> Conditions for price discrimination
<5> On efficiency

 

 

 

 

 

 

 

 

 

 

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