Natural Monopoly Advantages And Disadvantages

Many say that there is no such thing as Natural Monopoly. It is simply because Monopoly itself is Monopoly no matter what. There is no categorizing Monopoly. Creating the theory of Monopoly does make some sense. Natural Monopolies often occur in markets for essential services which require a ton of budget and expensive infrastructure. It is dubbed necessary for public utilities like Power Supply, Water, Railway Service, Cable TV, gasoline and the like. People believe that Natural Monopoly originated way back in the 18th and 19th century, however, the term “Natural Monopoly” was created only recently. In order to prevent abusing their monopoly status, governments came up with the idea of regulating public utilities. How natural were the early natural monopolies? There were usually dozens of competitors for a single public utility. Competition was at a maximum. Imagine this, there were about six electric light companies formed within just one year in New York City. When studies were made about 50 years after the rise of natural monopoly, it was found out that excessive competition can be destructive to the competing companies but it is beneficial to the consumers. As a result, one The Gas Light Company of Baltimore objected the government to continuously grant franchise rights to new competing companies. In order to make up for losses, some companies merged

I would say the best advantage it gives the consumers is having more options to choose from. When competitors compete, it only makes the consumers the beneficiary. What are its disadvantages? It leads to excessive competition which only leads to financial losses. Some competitors even end up merging just to make up for their significant losses. Only a few dominate and end up with profit. Worst is, some companies become bankrupt and end up selling their rights to operate. To prevent this, the government came up with efforts to avoid wasteful