Partial monopoly

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The partial monopoly describes an asymmetrical market form in economics . Numerous buyers on the one hand face a large supplier (the partial monopoly) and one or more small suppliers on the other. In a partial monopoly, one provider dominates the other competitors in terms of market share .

Pricing

Due to the asymmetrical form of the market, the providers of the partial monopoly choose different strategies and have different supply functions . The supply functions of the small providers result from their marginal costs . The smaller competitors have higher marginal costs than the partial monopoly due to the smaller company size . As with Polypol, the smaller providers will choose the strategy of volume adjustment. So they are autonomous price takers and quantity adjusters . This means that they will take over the price determined by the partial monopoly and adapt their respective sales volume to this price.

The partial monopoly, on the other hand, has the role of setting the price. In order to achieve the goal of short-term profit maximization , he operates the so-called superiority strategy. This means that when setting the maximum profit price, the sub-monopoly takes into account the likely supply of smaller competitors on the market. The price-sales function of the partial monopoly therefore corresponds to the demand function corrected for the aggregated supply function of the smaller providers. The partial monopoly thus calculates with the superiority strategy how he can maximize his profit taking into account the sales volume of the smaller competitors. The same applies to the profit maximization of the partial monopoly as to the monopoly : marginal costs = marginal revenue . However, the marginal revenue function for the partial monopoly is not derived from the total demand, but from the corrected demand function.

If the partial monopoly plans long-term, however, there could be incentives to set very low prices in order to displace the smaller competitors and to achieve an unrestricted monopoly. This strategy of market displacement leads to foregoing profits in the present and carries the risk of later attracting new competitors through high monopoly profits.

Market result

If the partial monopoly chooses the strategy of superiority, the result is a completely different market result than if he were to choose a competitive strategy: The partial monopoly sets a higher price than in the competitive case, similar to a monopoly. Due to the higher price, the overall demand is lower. At first glance, a strange result emerges with regard to the respective market shares: the smaller providers react as polypolists to the increased market price with a higher supply volume, while the partial monopoly accepts a smaller supply volume in order to enforce the higher price. Thus the partial monopoly foregoing market share through its strategy of superiority in order to maximize its profit.

Partial monopoly and market leadership

A partial monopoly always has the position of market leader in its respective market . The company that has the highest market share of all providers is generally referred to as the market leader. The criterion of the highest market share is a necessary but not a sufficient criterion for a partial monopoly. This means that not every market leader can necessarily be called a partial monopoly. Because not every market leader is in a position to "dictate" prices to smaller competitors. If the market leader does not feel superior to his competitors at all, he chooses a competitive strategy instead of the superiority strategy. That means, he behaves like the other providers as a polypolist. This means that a distinction must be made between whether a company only has the highest market share in a relevant market, or whether it is actively exploiting this position in order to be able to enforce monopoly-like prices.

Need for regulation

Due to its exceptional position on the market, a partial monopoly enforces a higher price than the market price in the case of perfect competition. As a result, no allocative efficiency is achieved on the sub-monopoly market . This raises the question to what extent such a market should be regulated within the framework of competition policy . The law against restraints of competition (GWB) knows neither the concept of partial monopoly nor that of market leadership. According to § 18 GWB, however, a company has a “dominant market position” if it has no competitors, is not exposed to any significant competition or has a superior market position in relation to its competitors. The criteria for such a market position include market share, financial strength and interdependence with other companies. A dominant market position as such does not pose a problem. Only the abusive exploitation of a dominant market position is prohibited according to Section 19 GWB.

In principle, breaking up a partial monopoly would also be conceivable in terms of competition policy. However, this is not provided for in German competition law. However, merger controls are permitted in order to prevent the emergence of dominant companies.

Example of a partial monopoly

The OPEC (Organization of Petroleum Exporting Countries) can be seen as a prominent example of a partial monopoly . OPEC not only holds the largest share of the world market in the production of crude oil, but also has a massive influence on the world market price with its production policy.

literature

  • Hohlstein, M. / Pflugmann-Hohlstein, B. / Sperber, H. / Sprink, J. (2009): Lexikon der Volkswirtschaft , 3rd edition, German paperback Publisher: Munich
  • Ott, A (1979): Basic principles of price theory , 3rd edition, Vandenhoeck & Ruprecht: Göttingen
  • Hohlstein, M. (2012): What exactly does "market leadership" mean? , in Brandt, K. / Ott, A .: On the future of competition , Metropolis-Verlag: Marburg, pp. 239–250

Individual evidence

  1. ↑ Hohlstein, M. / Pflugmann-Hohlstein, B. / Sperber, H. / Sprink, J .: Lexicon of Economics . 3. Edition. Deutscher Taschenbuch Verlag, Munich 2009, p. 687-688 .
  2. ↑ Gabler Wirtschaftslexikon, keyword market forms. Retrieved March 29, 2017 .
  3. ↑ Ott, A .: Principles of Price Theory . 3. Edition. Vandenhoeck & Ruprecht, Göttingen 1979, p. 187-189 .
  4. ↑ Hohlstein, M .: Fundamentals of Microeconomics - Mathematical Foundations of Economics . Academic Publishing Association, Munich 2016, p. 42-43 .
  5. ↑ Pindyck, R. / Rubinfeld, D .: Microeconomics . 8th edition. Pearson, 2013, pp. 487-490 .
  6. ↑ Hohlstein, M. / Pflugmann-Hohlstein, B. / Sperber, H. / Sprink, J .: Lexicon of Economics . 3. Edition. Deutscher Taschenbuch Verlag, Munich 2009, p. 687-688 .
  7. ↑ Hohlstein, M .: What exactly does "market leadership" mean? In: Brandt, K. / Ott, A .: On the future of competition . Metropolis-Verlag, Marburg 2012, p. 239-250 .
  8. ^ Gabler Wirtschaftslexikon, keyword market leader. Retrieved April 18, 2017 .
  9. ↑ Hohlstein, M .: What exactly does "market leadership" mean? In: Brandt, K. / Ott, A .: On the future of competition . Metropolis-Verlag, Marburg 2012, p. 239-250 .
  10. ↑ Mankiw, N. / Taylor, M .: Fundamentals of Economics . 5th edition. Schäffer-Poeschel Verlag, Stuttgart 2012, p. 171-193 .
  11. ↑ Law against Restraints of Competition (GWB). Retrieved April 18, 2017 .
  12. ^ Schneck, O .: Lexicon of business administration . 7th edition. Deutscher Taschenbuch Verlag, Munich 2007, p. 628 .
  13. ↑ Tagesschau online, OPEC and the oil. Retrieved April 1, 2017 .