Concept of Monopoly Companies in the United Kingdom
In any market, if there is a single seller of a product then it will be considered as a monopoly. Firms in any market develop a monopoly by using different strategies. Like TSB and Lloyds were the banks who through horizontal integration creates a monopoly. The second strategy is vertical integration through which the production stages are controlled by firms for creating the monopoly. This strategy is mostly used in the oil industry. According to experts of a dissertation writing service, another strategy that firms use for creating a monopoly is the internal expansion of firms.
Why Monopoly Is Considered a Problem?
When a firm has a monopoly in the market, it sets the prices whatever it wants. As there are no other firms to compete with so the prices go higher. Due to the higher price fewer consumers are able to get benefits from the product, so it is considered as allocative inefficient. When there is a monopoly, there is deadweight loss. Monopoly also causes productive inefficiency because the product does not have the lowest point.
Due to monopoly, the firm makes more profit than the normal profit, so it is called a supernormal profit. In a monopoly, the firm sets the higher price, the consumers have to pay high, but the suppliers get the low price. So the only entity that gets the most benefit is the firm. You can consider the example of the farmers. When the prices of sugar or floor are very high in the market then you have usually seen the farmers going on strike or protest.
This is because the product has the highest price, but the farmers as a supplier are getting the low production price. If a monopoly exists for a longer period with too much high price, then it can cause the diseconomies of scale. When there are diseconomies of scale, the normal price of the product gets very high and it becomes impossible to bring it back to the low price. Monopoly also causes a lack of choices for customers and fewer incentives.
Why Monopoly is Not Always Bad?
On the off chance that there are huge economies of scale, a monopoly can profit by below costs. This can prompt lower costs for shoppers. Restraining infrastructures make supernormal benefit which can be put resources into Research and Development. This is significant for enterprises like clinical medications which require a great deal of unsafe venture. In many businesses which require generous venture – a cutthroat industry with many little firms would be unacceptable.
A homegrown monopoly may confront competition from abroad, and subsequently what may show up as a monopoly may in any case confront cutthroat pressing factors. Likewise, a monopoly may confront competition from related ventures, for example, Eurotunnel has a monopoly on train administrations from London to Paris, yet faces competition from carriers.
Is There a Monopoly In the UK?
In the UK, if any company has market hares more than 25%, then that firm is said to have the monopoly. Examples of monopolies in the UK market can easily be found. For example, the UBER in the UK has some monopoly as it is free to set whatever fares it wants. In other countries, individuals have many car booking apps and services in markets that are they do not have to face monopoly. But in the UK market, Uber is seen as dominating due to no competition. Other examples are pf British Airports, British Telecom, and British Gas. They have almost 100% of the market shares.
The technology sector in the UK is full of monopolies. Apple, Facebook, Google, and Amazon are right now considered monopolies in the UK market. The market share of UK domestic mail service, Royal Mail is more than 23 percent and it has a monopoly in the market. Another UK snacks producing company Walker has 58% of the market share. Severn Trent Water is a water company and has 100% shares in most of the areas of the UK market. BT sports has now become the single broadcaster in the UK with its monopoly in the live broadcasting of games.
How Government Can Regulate Monopolies?
The existence of a monopoly in any market is not considered good from an economic point of view. Government can control the monopoly by introducing competition in the market. Competition mostly does not exists because there are barriers to entry into the market. By removing or easing the barriers or conditions to enter the market, new firms can enter the market to compete with the existing firms. By regulating the prices government can also reduce the monopoly. If the monopoly company is converted into a public enterprise then the government has control over it.