Coercive monopoly

In economics and business ethics, a coercive monopoly is a firm, that is able to raise prices and make production decisions without the risk that competition will arise to draw away their customers. A coercive monopoly is not merely a sole supplier of a particular kind of good or service (a monopoly), but it is a monopoly, where there is no opportunity to compete with it through means such as price competition, technological or product innovation, or marketing; entry into the field is closed. As a coercive monopoly is securely shielded from the possibility of competition, it is able to make pricing and production decisions with the assurance that no competition will arise. It is a case of a non-contestable market. A coercive monopoly has very few incentives to keep prices low and may deliberately price gouge consumers by curtailing production.

Coercive monopolies can arise in free market or via government intervention to institute them. Some conservative think tanks, such as the Foundation for Economic Education, define coercive monopolies solely as those established by the government or via the illegal use of force, excluding monopolies that arise in the free market.

Contrasted with other monopolies

Exclusive control of electricity supply due to government-imposed "utility" status is a coercive monopoly because consumers have no choice but to pay the price that the monopolist demands. Consumers do not have an alternative to purchase electricity from a cheaper competitor, because the wires running into their homes belong to the monopolist.

Exclusive control of Coca-Cola, by contrast, is not a coercive monopoly because consumers have other cola brands to choose from and the Coca-Cola company is subject to competitive forces.