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