Monopoly

A monopoly is often considered as the opposite of perfect competition where only one supplier serves the market (Durlauf & Blume, 2016). In other words, a firm exercising monopoly power can set soaring prices without losing all its demand (Tirole, 1988). What is more, soaring prices might increase firms’ profits while reducing the quantity of goods offered. A situation also referred to as the monopoly rent. Note that consumers served by a monopolist usually pay higher prices and consume less leading to welfare losses in comparison with a scenario of perfect competition. This is the reason economist usually argue in favor of antimonopoly and antitrust policies.