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.
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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.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
A natural monopoly occurs when it is the most efficient to have one provider of a good.
They are calling for the telecoms giant to be split from its Openreach subsidiary to end its "natural monopoly" over the nation's broadband infrastructure, amid claims that 5.7 million customers, especially in rural locations, have internet speeds so low they break regulations.
The conventional wisdom in economics has been that franchise monopoly arises because of technology, in particular natural monopoly, which requires a single provider for cost minimization.
"natural monopoly" limits competition as a means for price
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 a natural monopoly the water industry is heavily regulated with all of its price limits, investment plans and outputs set by Ofwat on a five-year cycle.
The SSS is a "natural monopoly" and is sure to make money as it has no competition, Gatchalian said.
For example, topics such as barriers to entry, natural monopoly, and potential competition in pricing are illustrated through a discussion of why cable television rates are so high.
On the termination market, each operator has a natural monopoly and this is why we must regulate these rates.
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. We didn't win that election so it never happened.
During the 1980s and 1990s, regulations focused primarily on mandating access to the portions of the local telephone network that still represented a natural monopoly. This policy was epitomized by the two great landmarks of modern telecommunications policy: the breakup of AT&T in 1982 and the Telecommunications Act of 1996.