Natural monopoly is understood as the inevitable absolute ownership of production and service enterprises in those areas of the economy in which its existence is due to the interests of the state and the population.
The term monopoly was formed from two Greek words: mono, which translates as one, and the word poleo, meaning "to sell." Sovereign ownership of an industry is extremely rare in life. Most often, a group of persons has the exclusive right to production or sale.
Monopoly as a right can be granted by the state to certain enterprises, it can arise naturally or through the occupation of a dominant position in the market. In a number of cases, there is also a conspiracy of manufacturers, merging into a production group in order to oust competitors.
Monopoly is divided into three types:
- closed, i.e. a state monopoly that protects against the formation of a competitive environment by establishing legal or legislative prohibitions;
- natural, when the efficient use of resources is possible only with absolute ownership of production;
- open, arising when, due to circumstances, the only enterprise is the manufacturer and supplier of certain goods or services.
Monopoly is the absolute rule of one seller or manufacturer in a certain segment of the market. This situation is contrary to the norms of free competition and market economy, with the exception of natural monopoly in situations affecting the interests of the state and its population.
Depending on the situation, monopoly can be both justified, bringing benefits, and, conversely, violate norms and law. An artificially created monopoly position, carried out by conspiracy of a group of persons united in a single company or alliance, occurs to eliminate competitors.
Most often, companies operate according to the following scheme. First, there is an unjustified drop in prices, with which smaller companies are unable to compete. As a result, most of them are closed or bought up by future monopolists. After obtaining autocracy, prices begin to rise. Firstly, it is necessary to recover the losses incurred earlier as a result of the aggressive campaign. Secondly, in order to obtain higher profits.
Such a scheme of work can be implemented in large industrial sectors, where the emergence of new competitors is excluded due to the high price of entry into the market segment. This is an example of an “unhealthy” monopoly that harms the state and end consumers.
However, a monopoly is sometimes necessary. The central bank is one of the prime examples of natural monopoly. It is difficult to imagine what would have happened if the "printing press" was available to the masses. A similar situation is with the metro lines, railways and energy networks of the country.
A natural state monopoly arises where its presence is conditioned by the interests of the state and the security of citizens.
