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Restricted Ownership of Raw Materials and Inputs

2 March, 2015 - 12:11

In very few cases the source of monopoly power is the ownership of strategic inputs. If a particular firm owns all of an input required for the production of a particular good or service, then it could emerge as the only producer of that good or service.

The Aluminum Company of America (ALCOA) gained monopoly power through its ownership of virtually all the bauxite mines in the world (bauxite is the source of aluminum). The International Nickel Company of Canada at one time owned virtually all the world’s nickel. De Beers acquired rights to nearly all the world’s diamond production, giving it enormous power in the market for diamonds.With new diamond supplies in Canada, Australia, and Russia being developed and sold independentlyof DeBeers, however, this power has declined, and today DeBeers controls a substantially smaller percentage of the world’s supply.