Monopoly

Characteristics of monopoly markets:

1 A single seller of a highly differentiated product.

2 The product offered by the seller has no close substitute.

3 High entry barriers, with high costs and significant barriers to competition.

4 The firm has considerable pricing power.

5 The product is differentiated through non-price strategies such as advertising.

Source of monopoly power:

A patent or copyright that prevents other firms from entering the market.

Control over critical resources used for production.

Government-controlled authorization (natural monopolies). e.g., public utilities.

Strong brand loyalty can become a formidable barrier to entry.

Increasing returns associated with network effects. Network effects result from synergies related to increasing market penetration.