Monopoly, oligopoly and competition

In short: With competition many sellers compete, which lowers prices and raises quality. A monopoly has only one seller, an oligopoly a few large ones. Prices can then be higher.

In more detail: Antitrust law is meant to protect competition and prevent collusion.

In detail

• Perfect competition: Many small sellers, hardly any price power (farmers’ market).
• Monopoly: One seller can set price and quantity; network operators are examples.
• Oligopoly: Few sellers, such as mobile networks or petrol station chains.
• Cartel: Illegal price-fixing; fines by the Federal Cartel Office.
• Merger control: Large mergers are reviewed.
• Natural monopolies: A power grid pays off only once; hence the state regulates.
• Digital markets: Network effects lead to market power of a few platforms (angebot-und-nachfrage).