Monopoly Creation
There are instances in which the government initiates monopolies, creating a government-granted monopoly or a government monopoly. Government-granted monopolies often closely resemble government monopolies in many respects, but the two are distinguished by the decision-making structure of the monopolist. In a government monopoly, the holder of the monopoly is formally the government itself and the group of people who make business decisions is an agency under the government's direct authority. In a government-granted monopoly, on the other hand, the monopoly is enforced through the law, but the holder of the monopoly is formally a private firm, which makes its own business decisions.
Government-Granted Monopoly
In a government-granted monopoly, the government gives a private individual or a firm the right to be a sole provider of a good or service. Potential competitors are excluded from the market by law, regulation, or other mechanisms of government enforcement. Intellectual property rights such as copyright and patents are government-granted monopolies. Additionally, the Dutch East India Company provides a historical example of a government-granted monopoly. It was granted exclusive trading privileges with colonial possessions under mercantilist economic policy.
Government Monopoly
In a government monopoly, an agency under the direct authority of the government itself holds the monopoly, and the monopoly is sustained by the enforcement of laws and regulations that ban competition or reserve exclusive control over factors of production to the government. The state-owned petroleum companies that are common in oil-rich developing countries (such as Aramco in Saudi Arabia or PDVSA in Venezuela) are examples of government monopolies created through nationalization of resources and existing firms. The United States Postal Service is another example of a government monopoly . It was created through laws that ban potential competitors from offering certain types of services, such as first-class and standard mail delivery. Around the world, government monopolies on public utilities, telecommunications systems, and railroads have historically been common.
Postal Service
The postal service operates as a government monopoly in many countries, including the United States.