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INTRODUCTION
Monopoly is an economic situation in which only a single seller or producer supplies a commodity or a service. For a monopoly to be effective there must be no practical substitutes for the product or service sold, and no serious threat of the entry of a competitor into the market. This enables the seller to control the price.
One or more of the following elements are of great importance in establishing a monopoly in a particular industry:
(1) Control of a major resource necessary to produce a product, as was the case with bauxite in the pre-World War II aluminum industry.
(2) Technological capabilities that allow a single firm to produce at reasonable prices all the output of a particular commodity or service, a situation sometimes described as a "natural" monopoly;
(3) Exclusive control over a patent on a product or on the processes used to produce the product.
(4) A Government franchise that awards a company the sole right to produce a commodity or service in a given area.
HISTORICAL BACKGROUND
Economic monopolies have existed throughout much of human history. In ancient and medieval times dire scarcity of resources was common and affected the lives of most human beings. When resources are extremely scarce, little room exists for a multiplicity of producers for many products and services. The medieval guilds, for example, were associations of merchants or artisans that controlled output, set terms for entering a trade, and regulated prices and wages.
As nation-states began to emerge in the late Renaissance era, monopoly proved to be a useful device for sovereigns, ever strapped for the cash necessary to sustain their armies, courts, and extravagant life-styles. M ...