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 ?
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.
As discussed supra, New Economies tend to have this exact same natural monopoly characteristic of high fixed costs and low marginal costs.
Since at least the days of John Stuart Mill, natural monopoly has represented one of the central justifications for rate regulation.
10) Natural monopoly occurs when a single firm can serve the entire
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.
Now consider a natural monopoly in a two-type model.
Fixed-line operators have gone from being a natural monopoly to living through the sector's opening to investment, then privatization and, in the last 10 years, they've had to lead on technology advances like cellular telephones and the Internet--so they've had to make the most changes.
Mixing theoretical and empirical considerations, the book successively tackles the problem of rent extraction in a natural monopoly activity; the privatisation of public firms in a context of corruption; the problem of enforcement in a context of imperfect enforcement; the question of access prices; universal access in rural areas and the design of regulatory agencies and their relations with political power.
Analysts believe the most likely result of the probe is an acceptance that the provision of print directories is more or less a natural monopoly.
Republicans, of course, don't have any natural monopoly on strategic talent--they just give their best young strategists chances to run the biggest national races.
This is the most significant restructuring of a natural monopoly in Russia - which, for a long time, has been a barred territory for reformers", said Al Breach, chief economist at Brunswick UBS Warburg, a Moscow-based brokerage, adding: "It sets a precedent and a benchmark for the restructuring of Gazprom, Russia's gas monopoly, and the railway monopoly".