What is a quasi monopoly?

Quasi-monopoly is a kind of monopoly where there is more than one service provider for a particular good/service but the nature of the competition is such that similar kind of service/pricing is offered to the customers.





Generally speaking, quasi-monopolies occur when the marketplace in question has several characteristics:

  1. There are a very few number (generally 4 or less) of very large suppliers
  2. The requirements of the market are such that there is an extremely high barrier-of-entry to be competitive; that is, large, well capitalized (and possibly vertically-integrated) companies cannot effective be challenged by any newcomer not of the same size. In essence, the market is impenetrable by smaller (and/or more innovative) companies.
  3. The type of product or service being produced leads to very little (if any) product differentiation between the companies in the market
  4. Pricing is thus more a factor of the lack of competition between the few existing companies, than it is supply/demand.

For instance, a good place where a quasi-monopoly can occur is aluminum production. Ownership of supplies of aluminum create a barrier to entry, and the extremely large amounts of capital (and large efficiency gains that being fully vertically integrated provide) required means that such industries tend to have only a couple of huge firms. The product (processed aluminum) is very straightforward. Thus, this is a marketplace where quasi-monopolies almost always exist, with seldom more than 2 or 3 companies in the entire market.