government monopoly economics definition

Public monopoly operators are often unable to secure adequate fare increases, or to secure funds for investment in new buses.As a government agency the operator cannot voice opposition to political edicts even where these are detrimental to bus operations.Conforming to government guidelines for staff terms and conditions often results in over-staffing with high salary costs.Absence of competition often results in poor service.If all bus services within a city or urban area are provided by one publicly-owned company it’s a public monopoly.

See the sections dealing with Area Contract – Net Cost and Area Contract – Gross Cost. The area may cover an entire urban area or a substantial part of it. In addition, depending on the financial incentive program and the extent of the government's powers, there may be a tendency for service quality to be poor, with the service catering only to those with no choice of transport mode.Ī private monopoly is, in effect, an area contract awarded to a private sector operator. A common problem is exploitation of the users, by offering inadequate or unsatisfactory services at excessive fares.Īs with the public monopoly, there is a tendency for staffing levels, wages and other costs to rise at a faster rate than they would have done under a competitive regime. A privately owned monopoly, unless effectively regulated, may also have serious disadvantages. Another is the inability of public monopolies to generate sufficient funds to pay for bus maintenance and investment in infrastructure. Poor service because of a lack of competition is a typical example.

There are several inherent disadvantages of a public monopoly system. The experience of developing countries around the world shows that public monopolies fail to deliver a sustainable public transport service. In almost all cases, instituting a public monopoly structure is inadvisable. A monopoly may be publicly or privately owned.

Government monopoly economics definition