Disadvantages monopoly game

Another potential advantage of a monopoly is that they can use their supernormal profit to subsidize socially useful but loss-making services. For example, a train company can use its monopoly power to set high prices on peak services, but this allows the firm to subsidize unprofitable late-running services on Sat night, which is useful for people going out for the night. Avoid the duplication of services.

In some areas, the most efficient number of firms is one. For example, if a city deregulates its bus travel, then rival bus companies may compete for profitable peak-hour services.

This may lead to increased congestion as several buses turn up at once. It is more efficient to have a monopoly and avoid this inefficient duplication of services. Examples of industries where monopoly is the best option Electricity distribution: To distribute electricity to every home in a country, it is most efficient to have a monopoly provider.

Disadvantages of monopoly 1. Poor level of service. Did you find this is helpful? Advantages and Disadvantages Solar Energy. Keep me login. Sign Up. Sign up for free and join one of the Best Community of Skilled Peoples. Source of revenue Despite the fact that monopolies are often a source of restricted competition and entry of other sellers in the market, they are still encouraged because monopolies can earn good amounts of profits, being the only sellers in the markets and hence, they become good sources of revenue for the government which benefits the society as a whole.

Profits As already discussed, a monopoly refers to a single seller operating and selling a good in the market of a large number of buyers. Source of essential public utilities Monopolies are often state controlled and run companies that help in producing and making available goods that are essential and important for public utilities that operate on large scale to provide the essential goods and services to the people in the community.

Potential to face depression The nature of a monopoly is such that being the only seller of a particular good, the company would always gain the demand of the consumers solely, which means that even in situations like economic depressions, a monopoly can survive because of the demand received by the consumers in the market.

Disadvantages Exploitation of consumers Since there is only one seller in the market in a monopoly, the entire power of providing the good, at a certain price or at a certain quality remains in the hands of the seller and no power lies in the hands of the consumers. Price discrimination Since Monopolies decide their own prices in the markets, with no competition to worry about, it has been seen often that the seller tends to charge different prices from different sets of consumers, causing a discrimination in the prices.

Quality of goods Since there is no competition in such a market, a monopoly can often provide low or inferior quality of goods to save their costs of production and make more profits, thereby causing a loss to the consumers. Allocation of resources The allocation of resources in a monopoly is often biased and distorted because in the production of such goods, the resources can often not be acquired by small firms or sellers or at least by a significant number of firms in the market, providing a benefit to the seller to be able to control and restrict the supply as well as competition in the markets.

Unfair trade practices It is well-known that a monopolistic market often is a barrier to new entrants in the markets. Share This. Because there is only one company can provide or produce the product, the company can increase its prices to make the highest profit.

According to the Stigler n. In fact, this policy will hurt directly the customers. In contrast, Saudi Telecom Company reduced its prices because there are many companies in the telecommunication field. So the competition is coerced Saudi Telecom Company to reduces its prices. In addition, the company that has monopoly may increase its prices because it is a victim of the company that provides the primary materials.

For example, imagine there is only one cars producer in a specific country and the producer depends on one company to receive its primary materials. If the provider of the primary materials raises its prices, the cars producer also will increase its prices.

So because the companies want to increase their profit and they follow the provider prices, the monopoly cause increased prices. Fourth, monopoly may cause many disadvantages for the employees of the company that has a monopoly. Actually, company can decrease the salaries for its employees because it wants to reduce its total cost. For example, if we imagine one private hospital in a specific country, the management of the hospital may give the doctors in the hospitals a small salary because doctors can not change their job because there is only one hospital in the country.

In addition, the company that has monopoly will offer little motivation for its employees such a training courses or premiums. For example, in previous example, the management of the hospital does not offer any motivation for its employee because it knows that the employees can not find other hospitals in the country. So the monopoly causes many disadvantages for the employees such unfair salaries or little motivation for the employees. On the other hand there are many opinions that support the monopoly.

In fact, some opinions say that the monopoly may help the company to import their products and compete with foreign companies. Enter some text. Get alert when someone else answer this question Invalid email. Email Required. Other Questions. How do I clear my browsers cache to play chess? Why there's no monopoly game for psp?

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