Natural monopoly

Common card · No. 337881

A natural monopoly is a monopoly in an industry in which high infrastructure costs and other barriers to entry give a market's largest supplier an overwhelming advantage over competitors. An industry is a natural monopoly if a single firm can supply the entire market at a lower long-run average cost than if multiple firms were to operate within it. In that case, it is likely that a single company (monopoly) or small number of companies (oligopoly), will serve most or all of the market's customers. This frequently occurs in industries where capital costs predominate, creating large economies of scale; examples include public utilities such as water services, electricity, telecommunications, mail, etc. Natural monopolies were recognized as potential sources of market failure as early as the 19th century; John Stuart Mill advocated government regulation to make them serve the public good.

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