Microeconomics › Section I · Monopoly › Topic I.1
How monopolies form: barriers to entry
A single seller with no close substitutes is not mysterious - it is the outcome of something that stops everyone else from selling. The barriers that do the stopping come in four main kinds, and every monopoly's story begins by naming which ones hold its gate shut.
In this topic
- Three conditions, one firm
- Four kinds of barrier
- Barrier 1: control of a key resource
- Barrier 2: legal barriers - patents and licences
- Barrier 3: natural monopoly
- Barrier 4: network effects
- Worked example: measuring a natural monopoly
- Worked example: diagnosing a monopoly's barrier
- Barriers erode
- Common mistakes to avoid
- Key takeaways
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