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top   »  strategy   »  business strategy   »  competitive advantage   »  competition   »  monopoly   »  natural monopoly

What is a Natural Monopoly?

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A natural monopoly is a particular situation in which a monopoly makes economic sense because it would be too costly to duplicate infrastructure. A classic example is a small country with a single railway company. New railways are costly to build so it may make sense for a country or region to have a single company running the rails. Natural monopolies are often price regulated because they own an important component of a nation's infrastructure and could raise prices significantly without facing any competition. In many cases, modern technology has allowed infrastructure that was previously considered a natural monopoly in areas such as telecom networks to be open to competition.
Overview: Natural Monopoly
Function
Economics
Definition
A monopoly that makes sense, typically because it would be too costly to duplicate infrastructure.
Related Techniques
Monopsony
Coercive Monopoly

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