• A monopoly consists of a single company that dominates an industry.
• A monopoly can develop naturally or be government-sanctioned for particular reasons.
• However, a company can gain or maintain a monopoly position through unfair practices that stifle competition and deny consumers a choice.

Pure Monopoly

A pure monopoly is a market structure where one company is the single source for a product and there are no close substitutes for the product available. Pure monopolies are relatively rare. In order for a provider to maintain a pure monopoly, there must be barriers preventing competitors from entering the market. Let's look briefly at some possible barriers:

1. Legal barriers : While there are laws in the United States that prohibit monopolies, there are several situations where the U.S. government allows them. In some cases, the monopoly may exist indefinitely with the government's permission and in other cases, a monopoly is granted for a specific period of time. Some examples of legal barriers are government-issued licenses, copyrights, and patents.

2. Control of resources : This barrier exists when a sole provider owns or controls an essential resource necessary to production. An example of this is Alcoa. For many years, Alcoa was the only producer of aluminum in the United States. Alcoa obtained exclusive mining rights to all of the bauxite aluminum ore mines in the country, and bauxite is necessary to the production of aluminum. This prevented competitors from entering the market.

3. Economies of scale : The economies of scale barrier occurs when the average total cost of a product goes down when production increases. Some businesses invest large amounts of money building the infrastructure to create their product. This is a fixed cost. Once the infrastructure is in place, the cost of producing a single unit becomes lower for each unit added because the fixed costs are spread out over a larger number of units. In terms of monopolies, an existing business with an established infrastructure has a cost advantage when producing large quantities of a given product, enabling it to undercut the competition on price. This is known as a natural monopoly and most typically refers to public utilities such as water services, natural gas.

Bilateral Monopoly

A bilateral monopoly exists when a market has only one supplier and one buyer. The one supplier will tend to act as a monopoly power and look to charge high prices to the one buyer. The lone buyer will look towards paying a price that is as low as possible. Since both parties have conflicting goals, the two sides must negotiate based on the relative bargaining power of each, with a final price settling in between the two sides' points of maximum profit.

This climate can exist whenever there is a small contained market, which limits the number of players, or when there are multiple players but the costs to switch buyers or sellers is prohibitively expensive.

I hope this helps.