A monopoly
happens when there is only one producer in a market and there are no close
substitutes that produce or sell the same product as the monopolist. In the
game monopoly, the player’s goal is to own all of the properties of the same
colour therefore the rent for each properties will increase altogether. This is
a similar scenario in the economic world where it is termed as a player having
a monopoly of properties in a particular area which also means they will
determine the price to the consumer which normally is hiked up.
In Malaysia, the bluntest example to this
is Tenaga Nasional Berhad who is the heart and soul of the nation’s energy
sector supplies electricity throughout Malaysia. Tenaga Nasional Berhad has
been given the role to be the sole supplier of electricity in Malaysia thus
giving the company a monopolist status. Though many companies would like to
share the profits totalling up to an average of 2.5 billion in a financial year
raked in by TNB, it is not possible for any such companies to tap in to this
market because of the legal barriers to entry set up by the government of
Malaysia. License and necessary patents are mandated to TNB to be the only
company supplying electricity to the consumers directly.
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Most of the time monopolies will lead to a
higher consumer price, for example Astro, a Media cable company that is a
natural monopoly in Malaysia charges at a very high price only because they
have no competitors to challenge their price offers. But in this case having a
competitor will create many complications in the market and most likely increase
in the price of electricity. If TNB were to have a competitor, this also means
the amount of power plants will increase up to double the ones available now,
the power cables throughout Malaysia will also increase, and this will lead to
a higher production cost thus lead to a higher price for electricity consumers.
In addition to that, TNB is also given the rights to gain monopoly of scarce
material to produce electricity. This means TNB gains access to coal in
Malaysia. It is an important effort to further reduce the price of production.
Though monopolism is more commonly known to
be a bad market structure, but it is proven here, that sometimes measures such
as this has to be taken for the good of the economy and welfare of the people
and government.
Good article. Perhaps you could consider including the "good monopoly" to make it more interesting. Monopoly has always been regarded as bad as what you mentioned..say some good things about them
ReplyDeleteHi WIZZERD, thanks for your comment and advice. Yes, I did state there that a monopoly is most of the time associated as a bad market structure. But in the case of my article I was proving otherwise as when it comes to electricity supply, having a monopoly is the best way to do it. As this will reduce cost. So I personally think that this is a good Monopoly. I hope this is what you meant by the comment. But do correct me if i'm wrong. thanks.
ReplyDeleteThis is a question posted by Desmond on our chatbox. We find it to be related to this post. "Desmond: Hi guys. i find this blog to be informative. Just one question. In Malaysia is Petronas a Monopoly in the domestic Oil and Gas industry?"
ReplyDeleteOur reply to him was "foureconomicjokers: Hey Desmond. Thanks for the question. Petronas is an Oil and Gas company wholly owned by the Malaysian government. Therefore, it is natural that Petronas is definitely a giant company in Malaysia.However, it is an oligopoly. Petronas do not dictate prices. Petronas together with companies like Sapura-Kenchana and Petra Industries control the Oil and Gas industry of Malaysia."
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