A pure monopoly is a market arrangement in which a single company is the exclusive supply of a product and there is no close substitute. A pure monopolist corporation is uncommon on a global scale, yet they do exist. Microsoft, for example, has a near-monopoly in computer operating systems. Yet, pure monopoly can be clearly identified in local places (McConnell et al., 2012). Cell phone firms, utility corporations such as power and water in certain towns, and professional sports clubs are other examples. These businesses survive since it is inefficient to quadruple infrastructure while keeping the same number of customers (Baldwin & Scott, 2013). For example, having two power plants will suggest having two sets of cables running into homesteads.
In this essay, I have chosen a local monopolistic power plant referred to as Pioneer Electric Cooperation, which is located in Minter Alabama. The main barriers of entry into this market are that due to the small population as well as territorial division, it is difficult for another company to thrive, and, therefore, Pioneer Electric maintains as the only provider of electricity (Hovenkamp, 2015). Moreover, there is no substitute for receiving electric power for the residents, other than running generators. However, running a generator is potentially more costly and dangerous. With no competition accrued to Pioneer Electric, the residence of Minter Alabama is forced to use this company. As a result, the company utilizes above-mentioned fact to its merit by charging a high price in which the consumers have to pay.
In summary, there have been many monopolies throughout the history. However, these firms often get dissolved into smaller companies, due to the intervention of the government that is aimed at lowering the price by increasing competition. Therefore, unless Pioneer Electric receives a substitute or is divided into smaller firms, it will be hard to challenge it in its monopolistic position.
References
Baldwin, W., & Scott, J. (2013). Market structure and technological change (Vol. 18). Taylor & Francis.
Hovenkamp, H. (2015). Federal Antitrust Policy, The Law of Competition and Its Practice. West Academic.
McConnell, C., Brue, S., & Flynn, S. (2012). Macroeconomics (2nd ed.). New York: McGraw-Hill/Irwin.
