Movie Case Study
The scene shows a conversation between Howard Robard Huges (played by Leonardo De Caprio) and the Senator of Maine. They are discussing the CA bill or the Community Airline bill. The Senator wants to introduce the CA bill as that would give Pan Am exclusivity on international air travel. While Howard doesn’t agree with this as this would create a monopoly.
In this blog, Learning Perspectives will explore the meaning of Monopoly.
What is Monopoly?
Monopoly in Economics and business is a market structure that is characterized by no competition. A monopolistic business would have the power to dictate prices and the supply chain of the product. They also create barriers for other companies to enter the market space. There are many types of monopolies.
A natural monopoly
This generally occurs when there are high fixed costs in the market and it is difficult for other small companies to enter. A big company can easily provide services such as government electricity or water provider. These companies have well-researched technology & specialization. These monopolies are regulated by the government. An example can include BSES power and the Delhi Viduyt board.
This is characterized by many sellers in the marketplace indicating that barriers to entry are low. Products are similar but are not perfect substitutes. Different types of cafes and clothing have monopolistic competition. An example could be Nykaa, Purplle, Myntra, etc.
What is Oligopoly?
The US airline industry is considered an oligopoly. An oligopoly is a marketplace characterized by four or five large players. The above scene shows a time before the Airline Deregulation Act was passed. Post the bill was passed in 1978, the airline industry became an oligopoly where the market was dominated by few companies. Also, barriers to entry are enough to discourage new entrants from entering the market.