natural monopoly


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Natural Monopoly

A situation in which the barriers to entry for an industry or product are so high that it is not profitable for a second company to make an attempt. For example, an area may have only one utility company because it is prohibitively expensive to start another one. Governments generally regulate profits for natural monopolies to protect consumers.

natural monopoly

a situation where ECONOMIES OF SCALE are so significant that costs are minimized only when the entire output of an industry is supplied by a single producer so that supply costs are lower under MONOPOLY than under conditions of PERFECT COMPETITION and OLIGOPOLY. The natural monopoly proposition is the principal justification for the NATIONALIZATION of industries such as the railways. See MINIMUM EFFECT SCALE.
References in periodicals archive ?
allowing the natural monopoly to serve additional consumers more
Regulation indeed is a political act (Braeutigam 1989:1299), and is, therefore, implemented for reasons that appeal to those in power, be that the existence of natural monopoly or something else.
Offers on tariffs indexation of natural monopoly in 2014-2016 will be prepared until 1 July 2013.
That was in 1992 and it was indeed to take the National Grid, privatised in 1990, back into public ownership as a natural monopoly.
With the new price and silenced approval of using the natural monopoly, the regulators definitely took care "Toplifikacija" not to be damaged in any way.
problems usually seen as justifying rate regulation is natural monopoly.
He said that Railways serves poor Pakistanis in areas where no other forms of transportation are available and therefore should maintain its status as a natural monopoly.
The Tories and their friends in the City who privatised this natural monopoly are shameless in the face of this great rip-off.
Even if natural monopoly exists, the monopolist's ability to engage in price discrimination means the absence of efficiency losses.
2) In some industries, such as airlines, analysts saw a competitive industry struggling to emerge from the "dead hand of regulation"; (3) in others, scholars recommended deregulating parts of the industry and isolating the natural monopoly, where it could be regulated safely with access to all in the competitive sector.
He said: "The Tories transferred this natural monopoly into private hands in the 1980s.