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Concept
State monopoly
Summary
In economics, a government monopoly or public monopoly is a form of coercive monopoly in which a government agency or government corporation is the sole provider of a particular good or service and competition is prohibited by law. It is a monopoly created, owned, and operated by the government. It is usually distinguished from a government-granted monopoly, where the government grants a monopoly to a private individual or company.
A government monopoly may be run by any level of government—national, regional, local; for levels below the national, it is a local monopoly. The term state monopoly usually means a government monopoly run by the national government.
A state monopoly can be characterized by its commercial behavior not being effectively limited by the competitive pressures of private organisations. This occurs when its business activities exert an extensive influence within the market, can act autonomously of any competitors, and potential competitors are unable to successfully compete with it.
These activities have a major influence on the operational environment, when its trading activities are not subject to competitive forces inherent within free trading markets. Therefore, this results in using its market dominance and influence to its advantage, in affecting how the market evolves over a long period of time. This is especially the case if the state monopoly controls access to vital inputs essential to operating within the market.
The high degree of autonomy and ability to act independently in the market, has been demonstrated by the ability to alter relationships with its customers to its advantage, without negatively impacting its dominant market share. A state monopoly's ability to increase the price or quantity of goods and services provided, without a relational change in its own operating costs (coupled with maintaining this price or quantity at above a market clearing rate), demonstrates its ability to disregard any competitive forces within the market.
Official source
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