ogoluwa

monopolies typically exist in capital intensive industries where the market size is small in relation to the efficient scale. if a competitor were to challenge the incumbent, the incumbent could slide down the ATC curve to produce at a lower cost and still be able to supply the entire market. the industry would then have overcapacity and it wouldnt be economically feasible for two competitors to co-exist. in that case the new entrant would have risked a huge amount of capital in a loss making venture. a duopoly is different in that both competitors already produce at minimum cost while still supplying only a portion of total demand. none would produce more than they already do since they have exhausted their scale efficiencies.

would this make sense?