MONOPOLY

PRESENTED BY:
Priyanka Sharma
Jatin singh
Divya Lohia
Neha Sharma
Divya Kumar
 Monopoly

 Derived from Latin term.

Mono + poly

Single Seller
It refers to a market situation in which there is single seller/producer of a
commodity and number of buyers.
No close substitutes for the commodity
 Features of Monopoly

 Single seller and large number of buyers

 No close substitutes
 Restrictions on the entry
 Price Maker
 Control over market supply
 Profit maximization
 Price discrimination.
 Types of Monopoly

1. Natural monopoly
2. Public monopoly
3. Private monopoly
4. Legal monopoly
5. Simple monopoly
6. Discriminating monopoly
7. Technological monopoly
8. Absolute monopoly
9. Imperfect monopoly
10.Joint monopoly
 Types of Barriers to Entry

• Institutional barriers to entry.

Exclusive franchising
Licences
Patent Protection
• Technical Barriers to entry.
Unique resources
Economies of scale and scope
Economy of experiences
.

• Strategic barriers to entry.

Limit pricing
Excess capacity
Product differentiation
Monopoly Revenue Curve

Output
 CASE STUDY:

Indian Railways: A Monopoly

Organisation
 Summary
• Indian Railways is the biggest monopoly organization in India. The Railway network was started in
1853.Initially the network was controlled by a number of companies, which were later joined together
after independence to form a single system. The whole system is under the ministry of railways, also
called the Railway Board. The system is so big, that a separate budget is presented in the parliament.
Indian Railways is the biggest transportation system in India, and has the second biggest rail network in
the whole world, next only to China. It carries twenty one million passengers per day. Indian Railways are
the major carrier for bulk goods like steel, cement, coal, fertilizers etc. It carries more than nine hundred
million tons of freight traffic per year. The problems involved in managing such a large system can be
imagined, especially when the whole system is under the central government. The whole system has
been divided in sixteen zones, besides one zone for metro Kolkata, each headed by a general manager
for running of trains. Besides there are eight more units each headed by a general manager to look after
research, electrification, construction, and manufacturing units for locomotives, passenger coaches,
wheels and axles etc. Besides this there are sixteen public sector undertakings/organizations to look after
other work like consultancy, construction, catering, finance, and container services.
• Because of the large staff strength, the unions are very powerful
• Because of govt. control, the system remained independent, and private sector was not allowed to
participate in it. While it is supposed to be financially viable, at the same time, the fares are kept low, so
that the common man can freely travel on the same.
• Railways can be a highly profitable organisation. However, the decisions are not on
business principles. Because of public pressure, they continue to run trains where it results
in massive losses. The passenger fares are so low, that the masses want to travel by train,
resulting in overcrowding in trains with its own safety implications.
• One of the worst examples is transportation of oil from the refineries to the petrol pumps.
Sending by truck is not possible because of the logistics involved. All the refineries initially
came to the Railways for transportation of finished goods such as petrol, diesel etc. to the
destination. The railways hiked the freight rates abnormally high and also asked for
compensation for extra facilities being created for transportation of oil. As the oil
companies had to transport oil, initially they accepted a lot of demands under duress. But
the overall scenario was so tough that it became costlier than the pipe lines. Since the
railways did not treat the oil companies as big customers, but as persons who needed
them, the oil companies became sick of the entire arrangement and decided to go in for
the pipe lines. The railways being a ministry became aware of these plans when they came
before central planning board, but the railways did not wake up, and as a result, lost the
entire business to the pipe lines, resulting in a big loss to the railways.
• Various committees have recommended that the staff strength be reduced drastically, but
the same could not be implemented because of stiff resistance of the two unions.Being a
government organization, all pay commission, recommendations become applicable on
railways also, which the central government insists has to be financed by the railways from
their own sources. The pension payment are also creating havoc.
 REASONS FOR LOSSES IN THE MONOPOLY
AS PER THE CASE:-

• While it is supposed to be financially viable, at the same time, the fares are kept
low, so that the common man can freely travel on the same.
• Railways can be a highly profitable organisation. However, the decisions are not on business
principles.
• Because of public pressure, they continue to run trains where it results in massive losses.
• The passenger fares are so low, that the masses want to travel by train, resulting in
overcrowding in trains with its own safety implications.
• One of the worst examples is transportation of oil from the refineries to the petrol
pumps.
• Sending by truck is not possible because of the logistics involved. All the refineries initially
came to the Railways for transportation of finished goods such as petrol, diesel etc. to the
destination.
• The railways hiked the freight rates abnormally high and also asked for compensation for
extra facilities being created for transportation of oil.
• As the oil companies had to transport oil, initially they accepted a lot of demands under
duress.
• The overall scenario was so tough that it became costlier than the pipe lines. Since the
railways did not treat the oil companies as big customers, but as persons who needed them,
the oil companies became sick of the entire arrangement and decided to go in for the pipe
lines.
• The railways being a ministry became aware of these plans when they came before central
planning board, but the railways did not wake up, and as a result, lost the entire business to
the pipe lines, resulting in a big loss to the railways.
• Various committees have recommended that the staff strength be reduced
drastically, but the same could not be implemented because of stiff
resistance of the two unions.
• Being a government organization, all pay commission, recommendations become
applicable on railways also, which the central government insists has to be financed by
the railways from their own sources.
• The pension payment are also creating havoc
Monopoly graph in case of Indian Railways
 WHY INDIAN RAILWAYS IS CONSIDERED A
MONOPOLY:-
• Single seller many buyers
• No substitutes ‘not even close’
• Closed entry
• Price Maker
• Price discrimination
• Senior citizen
• Students
• handicapped
• Army officials, etc
 RECOMMENDATIONS TO THE MONOPOLY OF
INDIAN RAILWAYS:-
• The ownership of the railway infrastructure must be government owned.
• The design, operation, expansion and management of the railway network and infrastructure must be with a
regulatory body like that for aviation.
• The ministry of railways must be merged into the ministry of civil aviation, surface transport, national
highways, and others to form a ministry of transport. This will formulate critical legislation regarding safety
regulations, costumer rights and welfare, standardization, quality of service etc.
• This train operating company called Indian railways shall compete with private train operating companies
which will also be allowed to run trains using the same network on equal terms.
• Divide the railway network into 5-12 trunk routes and others. Let the ministry of transport own these routes
and transfer the rest to the respective states. Let the central establishment work mostly on trunk routes and
the state governments expand the local network, light rail systems and integrate them with the trunk routes.
This will give better coverage and utilization.
• Any proposed routes, expansions or modernizations must be cleared by the national rail governing body to
ensure it meets the national rail standards, quality, safety etc. and is compatible with the existing trunk
routes.
THANK YOU