VIETNAM NATIONAL UNIVERSITY

HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY (HCMUT)

FACULTY OF CIVIL ENGINEERING
🙞···☼···🙞

COURSES: CONSTRUCTION ECONOMICS

CHAPTER III: COMPETITION AND MONOPOLY
Group H
Student Student ID
Truong Ba Quy (Leader) 2153764
Nguyen Gia Hien 2111210
Nguyen Khang Cat 2152444
Nguyen Tan Nghia 2153618

LECTURER: DR. THI HUYNH NGOC

Ho Chi Minh city, 12th January, 2025

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 TABLE OF CONTENT
PART 1: COMPETITION AND MONOPOLY ................................................................. 4
1 Introduction ................................................................................................................... 4
1.1 Objective of the Report .............................................................................................. 4
1.2 Relevance of Market Structures in Economic Analysis ............................................ 4
1.3 Conceptual Framework .............................................................................................. 4
1.3.1 Competition ......................................................................................................... 4
1.3.1.1 Characteristics of Perfectly Competitive Markets....................................... 4
1.3.1.2. Role in Enhancing Efficiency and Ensuring Profitability for Suppliers .... 5
1.3.2 Monopoly ............................................................................................................. 6
1.3.2.1. Definition and Key Characteristics ............................................................ 6
1.3.2.2 Market Dynamics under Monopoly (e.g., Price Control and Restricted
Entry) ....................................................................................................................... 7
1.3.2.3 Economic Consequences of Monopoly Power ............................................ 8
1.4 Comparative Analysis: Competition versus Monopoly ............................................. 9
1.4.1 Benefits and Limitations of Competitive Markets .............................................. 9
1.4.1.1 Advantages of Competition ......................................................................... 9
1.4.1.2 Drawbacks of Competition ........................................................................ 10
1.4.2 Economic Implications of Monopoly Power ..................................................... 10
1.4.2.1 Definition of Monopoly ............................................................................. 10
1.4.2.2 Positive Aspects of Monopolies ................................................................ 11
1.4.2.3 Negative Aspects of Monopolies .............................................................. 12
1.4.3 Situations Where Monopoly May Be Preferred Over Competition .................. 12
1.5 Critical Discussion: Is Competition Always Optimal? ............................................ 13
1.5.1 Overview between two market .......................................................................... 13
1.5.2 Comparison of Competition and Monopoly ...................................................... 14
1.5.3 Evaluation of Optimal Market Structure ........................................................... 14
1.5.3.1 No Pure Market Structure .......................................................................... 15
1.5.4 Conclusion ......................................................................................................... 15
PART 2: THE ROLE OF PRICE MANIPULATION IN MONOPOLY MARKETS ..... 16

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 2.1 Introduction .............................................................................................................. 16
2.1.1 Definition and Significance of Price Manipulation ........................................... 16
2.1.2 Mechanisms Used in Monopolistic Markets (e.g., artificially inflating or
deflating prices) .......................................................................................................... 16
2.2 Impacts of price manipulation on market stakeholders ........................................... 17
2.2.1 Effects on Consumer Welfare and Market Access ............................................ 17
2.2.1.1 Introduction to Consumer Welfare and Market Access ............................ 17
2.2.1.2 Price Manipulation and Consumer Welfare .............................................. 17
2.2.1.3 Market Access and Barriers to Entry ........................................................ 17
2.2.2 Implications for Innovation, Growth, and Supplier Sustainability .................... 18
2.2.2.1 Impacts on innovation and growth ............................................................ 18
2.2.2.2 Impacts on supplier sustainability ............................................................. 18
2.3 Case Study: The Role of Price Manipulation in Petroleum Markets in Vietnam .... 19
2.3.1 Background of the Petroleum Market in Vietnam............................................. 19
2.3.2 Analysis of Price Manipulation ......................................................................... 19
2.3.3 Evaluation of Market Responses and Regulatory Measures ............................. 20
2.3.4 Conclusion and Recommendations.................................................................... 20
2.4 Evaluation and Insights ............................................................................................ 21
2.4.1 Key Lessons Learned from Monopolistic Practices .......................................... 21
2.4.2 Comparative Insights with Competitive Market Dynamics .............................. 21
2.5 Conclusion and Recommendations .......................................................................... 22
REFERENCES .................................................................................................................. 24

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 PART 1: COMPETITION AND MONOPOLY
1 Introduction
1.1 Objective of the Report
This report aims to analyze the dynamics of market structures, focusing on
competition and monopoly, to understand their economic implications and relevance.
Through a detailed examination, this report seeks to identify how these structures influence
economic policy, market behavior, and stakeholder decisions.
1.2 Relevance of Market Structures in Economic Analysis
Market structures in economics are often analyzed by examining several key factors
that distinguish different players within an industry. These factors include the industry’s
buyer structure, customer turnover, the degree of product differentiation, the nature of input
costs, the number of firms in the market, the extent of vertical integration within the same
industry, and the market share of the largest player. By cross-examining these factors,
economists can identify patterns and similarities, which help categorize and differentiate
companies across various industries. This analysis forms the basis for classifying market
structures into four main types: perfect competition, oligopoly, monopoly, and
monopolistic competition, each characterized by distinct features such as the number of
competitors, pricing power, and market entry barriers.
1.3 Conceptual Framework
1.3.1 Competition
1.3.1.1 Characteristics of Perfectly Competitive Markets
Perfectly competitive markets

Figure 1.1: Perfect competition [1]

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 Perfect competition is an ideal market in which there are many buyers and sellers,
and they all have perfect and balanced information. Therefore, sellers have absolutely no
ability to decide the market price, but the market price will be self-shaped by the law of
supply and demand.
Unlike monopolistic competition, in perfect competition, buyers and sellers can
know the price at which they can buy and sell, without any business being able to influence
the price in the short, medium and long term. [2]
Basic characteristics of perfect competition
First, the products must be homogeneous: The goods of a perfectly competitive
market are perfect substitutes with exactly the same function and quality, and there is no
difference in brand. Therefore, the price will be determined by other factors such as
production costs. [2]
Second, there are many sellers and buyers in the market, so that no individual or
group has power in the market. And each participant only occupies a very small part of the
market. [3]
Third, information is completely public and perfect: Buyers and sellers have full
knowledge of the price and detailed information about the product, which helps consumers
have the most accurate assessment of the product and not buy at a wrong price. [3]
Fourth, because of perfect information and the price is determined by the market, at
the equilibrium point of the market, no business receives economic profit, and businesses
produce at the lowest average cost per product, which is equal to the marginal cost (the
additional cost when producing 1 more product) and equal to the marginal revenue. [2]
Fifth, there are no barriers to market entry: The quantity of goods is completely the
same in price and quality, information is perfect, so businesses can freely enter or withdraw
from the market. If a company withdraws from the market, the market output decreases
and pushes the market price up in the short run, encouraging other businesses to increase
output, the revenue and economic profit of the business will increase. If a company enters
the market, output increases, so the market price will fall in the short run, causing other
businesses to reduce output, reducing the business's revenue and economic profit. [2]
1.3.1.2. Role in Enhancing Efficiency and Ensuring Profitability for Suppliers
Promoting production efficiency
Businesses have to compete with many competitors, so they have to find ways to
reduce production costs to be able to offer competitive prices. This encourages businesses
to apply new technologies, improve production and management processes to optimize
costs.

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 To reduce costs, businesses need to increase labor productivity and use resources
effectively. This encourages businesses to invest in human resource training, improve
technology and increase productivity. [4]
Create incentives for innovation
In a perfectly competitive market, businesses cannot rely on monopoly advantages
to maintain profits. They must constantly innovate products, services and production
processes to meet the increasing needs of customers and compete with competitors.
Evaluate and discontinue underperforming business categories, focus resources on
products and services that generate higher profits, then consolidate, upgrade and diversify
services to increase customer loyalty. Create combined product packages to meet needs
and attract customers with attractive offers
To innovate, businesses need to invest in research and development (R&D). This
helps businesses create new products, improve product quality and come up with new
solutions to increase production efficiency. [5]
Ensure profits
In a perfectly competitive market, businesses cannot "fix" prices higher than the
market. Their profits mainly come from efficient production, cost reduction and
innovation.
A perfectly competitive market helps balance supply and demand. When supply
exceeds demand, prices will fall, forcing businesses to adjust output. Conversely, when
demand exceeds supply, prices will increase, creating opportunities for businesses to
expand production.
Enhance reputation and brand
To compete in the market, businesses must ensure product quality and offer
reasonable prices. This helps businesses build reputation and brand in the market.
Businesses must always listen and respond to customer needs to maintain a
competitive advantage. This helps businesses improve customer satisfaction and build
good relationships with them.[5]
1.3.2 Monopoly
1.3.2.1. Definition and Key Characteristics
Monopoly is a situation where a business or a small group of businesses completely
control a market, without competition from other competitors, there is only one seller and
produces a product with no close substitutes. This allows them to freely decide on price

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and output. This is one of the forms of market failure, an extreme case of a market lacking
competition.
Monopoly is classified according to many criteria: the level of monopoly, the cause
of monopoly, the structure of monopoly. Monopoly is a market where there is only one
firm supplying the entire output of the market. For example: Apple has had a monopoly
worldwide with its exclusive IOS operating system over the years.
A monopoly ha1s a special position in a specific market. If the monopolist decides
to raise the price of its product, it will not have to worry about competitors setting lower
prices to gain a larger market share, causing damage to itself. Monopolies decide and
control prices and supply. [6]
A pure non-competitive monopoly market is identified by the following three basic
characteristics:
There is only one firm supplying all the products in the market.
The products in the monopoly market have no close substitutes. If there are no close
substitutes for its products, the monopolist will not worry about consumers switching to
substitutes when the monopolist charges a higher price.
A pure monopoly has high barriers to entry or exit. The barriers to entry make the
monopoly the only producer and supplier in the market. If there were no barriers to exit,
there would be no products that the monopolist would have supplied to the market.
For construction
The construction industry involves many different entities, from large construction
companies to small contractors, architects, engineers, etc.
Construction products are very diverse, from housing projects, public works to
infrastructure projects.
Geographical location, natural conditions, urban planning, etc. have a great impact
on construction activities.
The construction industry is strictly managed by law and has many technical
standards.[6]
1.3.2.2 Market Dynamics under Monopoly (e.g., Price Control and Restricted
Entry)
During the monopoly period, the market undergoes significant fluctuations due to
the dominance of one or a few large enterprises. These enterprises control most of the
production and consumption of certain types of goods, and are able to set monopoly prices
to gain high profits.[7]

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 The emergence of monopoly does not eliminate competition; on the contrary, it
makes competition more diverse and fierce. Competition can occur between monopolies
or between monopolies and non-monopolies. Monopolies often seek to dominate and take
over non-monopolies by many measures such as monopolizing the purchase of raw
materials, monopolizing means of transport, and monopolizing credit, in order to eliminate
weaker competitors from the market.[7]
In addition, monopolies can use the strategy of cutting prices thanks to their
financial strength and business experience in the market. They reduce prices to such a level
that new entrants to the market as well as existing businesses are unable to compete and
have to withdraw from that market.[8]
1.3.2.3 Economic Consequences of Monopoly Power
In a perfectly competitive market, there is no monopoly power; all firms are price
takers, and no one has the ability to influence market prices. However, when a firm or a
group of firms achieves monopoly power, they can control prices and supply, leading to
negative economic consequences.
One of the main consequences is a reduction in resource allocation efficiency.
Monopolies can set prices higher than the equilibrium price in a perfectly competitive
market, leading to reduced production and consumption, causing a loss of social welfare.
This means that the total benefit to society is reduced due to the reduction in both
production and consumption.
In addition, monopoly power can lead to a lack of incentives to innovate. In an
environment without competition, monopolies have little pressure to improve their
products or production processes, leading to stagnation in technological development and
a decrease in the quality of products or services.
Furthermore, monopolies can create an unfair distribution of income. The high
profits from charging prices above marginal cost can be concentrated in the hands of a few
firms or individuals, while consumers pay higher prices for the product or service.
To mitigate these negative consequences, governments often adopt regulatory
measures and antitrust policies to promote competition and protect consumers. The
management and regulation of monopolistic markets is necessary to ensure that firms do
not abuse their market power, while encouraging competition and innovation in the
economy. [9]

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 1.4 Comparative Analysis: Competition versus Monopoly
1.4.1 Benefits and Limitations of Competitive Markets
1.4.1.1 Advantages of Competition
Competitive advantage refers to factors that allow a company to produce goods or
services better or more cheaply than its rivals. These factors allow the productive entity to
generate more sales or superior margins compared to its market rivals. Competitive
advantages are attributed to a variety of factors including cost structure, branding, the
quality of product offerings, the distribution network, intellectual property, and customer
service.[10]
Competition plays a vital role in shaping markets, benefiting both the economy and
society in numerous ways. It drives innovation by compelling businesses to continuously
improve their products, adopt cutting-edge technologies, and find creative solutions to meet
consumer demands.
This not only leads to better and more diverse products but also accelerates
technological advancement that can improve societal living standards, such as innovations
in healthcare, renewable energy, and digital technology.
Competition also promotes efficiency, as firms strive to reduce costs and use
resources optimally to stay ahead. For individuals, this results in tangible benefits like
lower prices, enhanced product quality, and greater choice, which directly improve their
quality of life. Moreover, competition encourages accountability and responsiveness
among businesses, as dissatisfied consumers can easily switch to alternatives.
Socially, it fosters inclusivity by enabling small enterprises and startups to challenge
established players, contributing to economic dynamism and creating new job
opportunities. However, by empowering consumers and distributing economic
opportunities more equitably, competition ultimately enhances overall social welfare and
reduces disparities, making it a cornerstone of a thriving society.

Figure 1.2: Competitive advantages [11]

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 1.4.1.2 Drawbacks of Competition
While competition drives innovation and efficiency, it is not without its limitations
and potential drawbacks. One significant issue is the risk of market failures, such as
externalities, where the full costs or benefits of economic activities are not reflected in
prices, leading to inefficiencies.
For example, environmental pollution caused by businesses striving to minimize
costs can harm society as a whole. Imperfect information is another concern, where
consumers or producers may lack adequate knowledge to make optimal decisions, resulting
in suboptimal outcomes.
Moreover, highly competitive markets can pose significant challenges for small
businesses, which may struggle to compete with larger firms that have more resources and
economies of scale. This can lead to market consolidation, reducing diversity and
potentially creating barriers for new entrants.
Additionally, intense competition often pushes firms to focus on short-term profits,
potentially neglecting long-term investments in areas such as sustainability, employee
welfare, or innovation. These drawbacks highlight the importance of balancing competition
with regulations and support systems to ensure markets function efficiently and equitably.
[12]
1.4.2 Economic Implications of Monopoly Power
1.4.2.1 Definition of Monopoly
A monopoly is a market structure with a single seller or producer that assumes a
dominant position in an industry or a sector. Monopolies are discouraged in free-market
economies because they stifle competition, limit consumer substitutes, and thus, limit
consumer choice.
A monopoly is characterized by a single company supplying a good or service, a
lack of competition within the market, and no similar substitutes for the product being sold.
Monopolies can dictate price changes and create barriers for competitors to enter the
marketplace.
Companies become monopolies by controlling the entire supply chain, from
production to sales through vertical integration, or by buying competing companies in the
market through horizontal integration, and becoming the sole producer.
Monopolies typically reap the benefit of economies of scale, which is the ability to
produce mass quantities at lower costs per unit.[13]

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 Figure 1.3: Monopoly
1.4.2.2 Positive Aspects of Monopolies
Monopolies, operating without the constraints of competition, have the ability to set
and maintain stable pricing, which can provide a sense of consistency and reliability for
consumers.
This pricing stability can be particularly beneficial in essential industries, such as
utilities or transportation, where unpredictable costs could significantly impact households
and businesses. Additionally, monopolies often enjoy significant economies of scale,
allowing them to produce large quantities of goods or services at lower costs per unit.
By spreading fixed costs, such as infrastructure or machinery, over high production
volumes, monopolistic firms can achieve greater operational efficiency than smaller
competitors in a fragmented market. Another key advantage of monopolies is their ability
to invest heavily in innovation.
Operating without the immediate threat of competitors, they can allocate substantial
resources to research and development with a focus on long-term breakthroughs, rather
than short-term market gains.
This can lead to the creation of groundbreaking products, technologies, or services
that might not emerge in a competitive market due to the financial and time constraints
faced by smaller firms. While monopolies can raise concerns about market dominance,
their potential to provide stable pricing, cost-efficient production, and innovative
advancements highlights their unique role in certain economic contexts.[4]

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 Figure 1.4: Advantages of Monopoly [14]
1.4.2.3 Negative Aspects of Monopolies
Despite their potential benefits, monopolies often pose significant economic and
social drawbacks. One of the most concerning issues is their ability to charge higher prices,
as the lack of competition enables them to prioritize profit over consumer welfare. This
results in reduced consumer surplus, where individuals pay more for goods and services
than they would in a competitive market.
Monopolies can also lead to inefficiencies in production and resource allocation, as
the absence of competitive pressure removes the incentive to minimize costs or improve
operational efficiency. Furthermore, monopolistic firms often create significant barriers to
entry, making it difficult for new competitors to enter the market. This stifles innovation,
restricts market dynamism, and limits choices for consumers.
Over time, the lack of competition can lead to complacency and reduced efforts to
improve products or services, which negatively impacts overall market quality and
progress. These issues underscore the importance of regulatory frameworks to prevent
monopolies from exploiting their market power and ensure a fair balance between
economic efficiency and consumer protection.
1.4.3 Situations Where Monopoly May Be Preferred Over Competition
In certain cases, monopolies may be preferable to competitive markets due to
efficiency, innovation incentives, and public welfare considerations. Natural monopolies
arise in industries where high fixed costs and infrastructure investments make competition
inefficient or redundant. Examples include utilities (electricity, water, and gas), railways,
and telecommunications, where a single provider can operate at a lower cost due to

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economies of scale. If multiple firms attempted to compete, it could lead to unnecessary
duplication of infrastructure and higher overall costs for consumers. In such cases, a
monopoly can provide services more efficiently, though government regulation is often
necessary to prevent price exploitation and ensure fair access.
Similarly, innovation-driven industries often rely on temporary monopolies to foster
technological progress. Intellectual property rights, such as patents, grant firms exclusive
control over their innovations for a limited period, allowing them to recoup the substantial
costs of research and development. Without such protections, competitors could freely
replicate new technologies without bearing the initial investment risks, discouraging firms
from engaging in costly innovation. For example, pharmaceutical companies rely on
patents to justify the billions of dollars spent on developing new drugs. While these
monopolies can drive progress, they also pose challenges, such as high prices for patented
products, necessitating regulatory oversight to balance incentives with consumer
affordability.[15]
Additionally, government-regulated monopolies play a crucial role in sectors that
provide essential services, particularly those with significant externalities, such as
healthcare, public transportation, and education. In such industries, allowing market
competition might lead to unequal access, as firms prioritize profits over public welfare.
For example, if healthcare were entirely privatized, lower-income individuals might
struggle to afford necessary treatments, exacerbating social inequalities. Government-
controlled monopolies can ensure that essential services remain accessible and fairly
priced, even if they do not always operate with the efficiency of competitive firms.
However, effective oversight and accountability measures are required to prevent
bureaucratic inefficiencies and ensure that these monopolies serve the public interest rather
than becoming stagnant or corrupt.
Thus, while monopolies are often criticized for inefficiency and consumer
exploitation, they can sometimes be the optimal market structure, particularly in industries
where competition would be impractical, harmful to innovation, or detrimental to public
welfare. Careful regulation and oversight are essential to mitigate potential downsides
while maximizing the benefits that monopolies can offer in specific economic contexts.[16]
1.5 Critical Discussion: Is Competition Always Optimal?
1.5.1 Overview between two market
“Monopolistic and perfectly competitive markets affect supply, demand, and prices
in different ways. In the real world, no market is purely monopolistic or perfectly
competitive. Every real-world market combines elements of both of these market types.”
In the Powerpoint given by the lecturer, the idea that "competition is the ideal market

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structure" stems from its ability to align supply with demand, ensure efficient resource
allocation, and maintain low prices for consumers. In a competitive market, firms are
incentivized to innovate, improve efficiency, and respond quickly to consumer needs.
However, this proposition is not universally applicable, as there are certain market
conditions where monopolistic structures may prove more effective. For example,
industries with high fixed costs, limited demand, or substantial economies of scale often
benefit from a monopolistic approach, challenging the idealized view of competition. [17]
1.5.2 Comparison of Competition and Monopoly
Competition and monopoly offer distinct advantages and disadvantages depending
on the market context. As we have already defined them, the comparison table below
summarizes their key differences:
Table 1.1: Key differences between markets

Aspect Competition Monopoly

Encourages innovation and Can be inefficient due to lack of

Efficiency
resource efficiency pressure to improve

Keeps prices low, benefiting Can lead to higher prices due to

Pricing
consumers control over supply

Easy entry and exit for High barriers to entry prevent

Market Entry
suppliers competition

Driven by the need to May invest in R&D if profits are

Innovation
outperform competitors reinvested (e.g., tech companies)

Works well in diverse, More suitable for limited markets or

Applicability
competitive markets high fixed-cost industries

1.5.3 Evaluation of Optimal Market Structure

The ideal market structure depends on the specific characteristics and requirements
of the market. Competition is optimal in industries where innovation, efficiency, and
consumer responsiveness are key, such as the tech or retail sectors. It ensures dynamic
market activity and prevents inefficiencies. Conversely, monopolies are more suitable in

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markets with high infrastructure costs or where economies of scale significantly reduce
production costs, as seen in utilities or niche services. But there is special consideration:
1.5.3.1 No Pure Market Structure
While the theoretical models of competition and monopoly provide a framework for
understanding market dynamics, real-world markets rarely align perfectly with either
structure. Instead, markets often operate along a spectrum between these extremes. For
example, industries like technology and pharmaceuticals exhibit characteristics of both
competition and monopoly. This hybrid nature means that optimal outcomes often depend
on balancing regulatory policies, innovation incentives, and consumer welfare. As such,
the evaluation of any market structure should consider not only its theoretical advantages
but also its practical implications in real-world contexts. [17]
1.5.4 Conclusion
Competition remains the preferred market structure for its ability to drive
innovation, ensure resource efficiency, and benefit consumers through lower prices.
However, monopolistic structures have a role to play in specialized contexts, particularly
when cost efficiency and streamlined operations are paramount. The analysis presented in
Powerpoint underscores the need to evaluate market characteristics carefully before
declaring competition or monopoly as the optimal choice.

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 PART 2: THE ROLE OF PRICE MANIPULATION IN
MONOPOLY MARKETS
2.1 Introduction
2.1.1 Definition and Significance of Price Manipulation
Market manipulation refers to artificial inflation or deflation of the price of a
security. Also known as price manipulation or stock manipulation, it involves the literal
manipulation of a financial market for personal gain. It means influencing the behavior of
the securities with the intent to do so. [18]

Figure 2.1: Price Manipulation in Market

Price manipulation can have significant impacts on the market, both short-term and
long-term. In the short term, it can create artificial price movements, leading to
misinformed investor behavior. These manipulations distort the true value of securities and
disrupt the market's ability to reflect accurate information about companies. In the long
term, repeated price manipulation can damage investor confidence, increase market
volatility, and even lead to regulatory scrutiny or penalties. Ultimately, such practices
undermine market integrity and can have harmful consequences for both individual
investors and the broader economy.
2.1.2 Mechanisms Used in Monopolistic Markets (e.g., artificially inflating or
deflating prices)
In monopoly markets, price manipulation plays a crucial role in maintaining control
over the market and maximizing profits for the monopolist. Since a monopoly is

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characterized by the absence of competition, the monopolist has significant pricing power,
allowing them to influence prices without the constraints of market forces. Price
manipulation in such markets can take the form of artificially inflating or deflating prices
to either attract or deter demand, depending on the monopolist’s objectives. By inflating
prices, a monopolist can increase their profits, often at the expense of consumers, while
deflating prices temporarily may be used to eliminate potential competition or maintain
market dominance. These manipulative practices limit consumer choice and welfare, as the
monopolist can control both the supply and pricing of goods or services, leading to
inefficiencies and a lack of innovation in the market.
2.2 Impacts of price manipulation on market stakeholders
2.2.1 Effects on Consumer Welfare and Market Access
2.2.1.1 Introduction to Consumer Welfare and Market Access
Consumer Welfare is typically defined as the well-being of individuals in a market,
which is directly influenced by the prices they pay, the quality of goods and services they
receive, and their overall satisfaction with market offerings. Market Access refers to how
easily consumers can access goods and services. This includes not only the availability of
products but also the pricing, variety, and the conditions under which they can purchase
items.
2.2.1.2 Price Manipulation and Consumer Welfare
In monopoly markets, firms can set prices significantly higher than in competitive
markets due to the lack of competition. This artificial price inflation forces consumers to
pay more for the same products, reducing their purchasing power and overall welfare.
Higher prices may lead consumers to prioritize essential purchases and forego non-
essential items, diminishing their standard of living. Additionally, monopolists have little
incentive to maintain or improve the quality of their products since they face no
competition. As a result, consumers may be stuck with lower-quality goods despite paying
a premium, which erodes the value they derive from their purchases.
Example: In the pharmaceutical industry, a single company may control the patent
for a life-saving drug, allowing them to raise prices without fear of competition. Similarly,
in areas with only one cable provider, consumers often pay high prices for poor service
because there are no alternatives.
2.2.1.3 Market Access and Barriers to Entry
Monopolists often engage in price discrimination, charging different consumers
varying prices for the same product based on factors like income or willingness to pay.
This creates unfair market access, particularly disadvantaging lower-income individuals.

17
Additionally, monopolists may use predatory pricing, temporarily lowering prices below
cost to eliminate competitors. Once the competition is eliminated, the monopolist can raise
prices again, harming consumers in the long run.
Example: Airlines are a common example of price discrimination, where
passengers pay different prices for identical flights based on booking time or loyalty. In
the retail sector, large companies like Amazon may engage in predatory pricing, driving
out smaller competitors by offering unsustainable low prices. Afterward, they can raise
prices, leaving consumers with fewer choices.
2.2.2 Implications for Innovation, Growth, and Supplier Sustainability
In monopolistic markets, where a single firm dominates and engages in price
manipulation, there are significant consequences for innovation, economic growth, and
supplier sustainability. Without competitive pressures, monopolists have less incentive to
innovate or improve products. In a competitive environment, businesses constantly strive
to offer better products, lower prices, or new features to stay ahead of rivals. However,
monopolists that control the market are not as motivated to innovate, as they face no
immediate threat of losing market share. This lack of competition leads to stagnation in
technological advancements and product improvements, which slows down overall
industry development and economic growth.
2.2.2.1 Impacts on innovation and growth
Monopolistic practices also hinder growth by creating high barriers to entry. New
firms often struggle to compete with established monopolists, especially when the
monopolist engages in tactics like predatory pricing, which temporarily reduces prices
below cost to eliminate smaller competitors. These barriers prevent new businesses from
entering the market, which limits the potential for new ideas, products, and services.
Without new entrants, markets stagnate, and the rate of economic growth slows down. The
monopolist’s control over prices and market entry contributes to this reduction in growth.
2.2.2.2 Impacts on supplier sustainability
Price manipulation also negatively affects suppliers. Predatory pricing practices,
where a monopolist temporarily lowers prices to unsustainable levels, make it difficult for
suppliers to stay competitive. Smaller suppliers, who rely on fair pricing to stay in business,
may be forced to either accept unfavorable terms or leave the market entirely. This further
consolidates power in the hands of the monopolist and reduces the diversity of suppliers.
The lack of fair competition creates a dependency on the monopolist, which harms smaller
suppliers and undermines their sustainability.

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 2.3 Case Study: The Role of Price Manipulation in Petroleum Markets in
Vietnam
In Vietnam, several industries are characterized by monopolistic or oligopolistic
structures, leading to concerns about price setting, market inefficiencies, and regulatory
effectiveness. This case study focuses on the petroleum sector as a real-world example of
price manipulation within a monopolistic market in Vietnam.
2.3.1 Background of the Petroleum Market in Vietnam
Vietnam's petroleum market is dominated by state-owned enterprises (SOEs),
particularly Petrolimex and PV Oil. These companies control a significant share of
petroleum importation, distribution, and retail. Due to this dominance, the pricing
mechanism in Vietnam's fuel market is heavily influenced by state regulations and
corporate decisions, raising concerns over potential price manipulation.

Figure 2.2: Market Share of Vietnam's Petroleum Market in 2022 [23]

The government regulates fuel prices through the Ministry of Industry and Trade
(MOIT) and the Ministry of Finance. Prices are adjusted based on global oil price
fluctuations, taxation, and supply chain costs. However, market observers have argued that
these adjustments are not always timely or reflective of actual market conditions, creating
artificial pricing structures.
2.3.2 Analysis of Price Manipulation
State control over fuel prices is a major factor contributing to price manipulation.
The Vietnamese government sets a base price for fuel, which SOEs are required to follow.
However, these adjustments are often delayed, causing price distortions. The Fuel Price
Stabilization Fund, designed to protect consumers from sharp price fluctuations, is

19
sometimes used to maintain higher prices rather than reduce them in favorable market
conditions. Limited competition and market barriers further exacerbate the problem. High
entry barriers prevent private enterprises from competing effectively with SOEs, reducing
market-driven price adjustments. Additionally, the government’s control over fuel
distribution channels further solidifies the monopoly status of state-owned firms. As a
result, consumers face higher prices due to controlled price adjustments that do not always
align with global market trends. Price manipulation reduces consumer choice and
economic efficiency, leading to long-term market inefficiencies.
2.3.3 Evaluation of Market Responses and Regulatory Measures
Vietnam has implemented a regulatory framework to manage state control over
petroleum pricing. Decree No. 94/2017/ND-CP establishes state control over specific
essential commodities, including petroleum, reinforcing the monopolistic structure. The
government has implemented periodic price adjustments and subsidy mechanisms to
mitigate the adverse effects of price control but with mixed effectiveness. Efforts have been
made to improve price transparency through increased reporting requirements and public
disclosure. The Competition Law of 2018 aims to prevent anti-competitive behaviors, but
enforcement remains weak against state monopolies.

Table 2.1: The category of Decree No. 94/2017/ND-CP on state monopoly [24]

2.3.4 Conclusion and Recommendations

The petroleum sector in Vietnam exemplifies how monopolistic control can lead to
price manipulation, impacting consumers and market efficiency. While regulatory
measures exist, they are often insufficient to prevent price distortions. To enhance market
fairness, the government should consider reducing entry barriers for private enterprises,
strengthening regulatory oversight and enforcement, and increasing market transparency

20
and consumer protection initiatives. By addressing these issues, Vietnam can move toward
a more competitive and consumer-friendly fuel market, reducing the adverse effects of
monopoly-induced price manipulation.
2.4 Evaluation and Insights
2.4.1 Key Lessons Learned from Monopolistic Practices
Monopoly activities in the economy bring both benefits and challenges, from which
many important lessons can be drawn for economic management and development.
Strengthening competitiveness and promoting technical progress
Monopolies often have strong financial resources, allowing investment in research
and development of new technologies, thereby improving labor productivity and
competitiveness. This contributes to promoting technical progress and economic
development towards modernization. [25]
Risk of abusing monopoly position and negative impacts on consumers
Despite the ability to reduce production costs, monopolies can impose high selling
prices and low purchasing prices, conduct unequal exchanges, create artificial supply and
demand for goods, causing damage to consumers and society. [25]
The need to control and regulate monopoly
To limit the negative impacts of monopoly, it is necessary to develop and implement
competition and anti-monopoly policies. Studying the experiences of other countries and
regions, such as the European Union, can provide valuable lessons for Vietnam in the
process of perfecting competition and anti-monopoly laws.[8]
State monopoly and its role in the economy
In Vietnam, state monopoly exists in a number of important strategic areas.
Maintaining state monopoly in these areas needs to be carefully considered to ensure
economic efficiency and social benefits, while facilitating the participation of other
economic sectors to promote fair competition.[26]
From the above lessons, it can be seen that the management and regulation of
monopoly activities requires careful consideration between economic benefits and the
protection of consumer rights, aiming towards a sustainable and fair economic
development.
2.4.2 Comparative Insights with Competitive Market Dynamics
Statistics show that 70% of businesses fail within their first 10 years due to a lack
of understanding of the competitive landscape and ineffective strategies. Porter's 5 Forces
model is a widely used tool to address this. Developed by Harvard Business School

21
professor Michael Porter, the model, introduced in his 1980 book Competitive Strategy,
helps businesses analyze industry competition. Porter's contributions include identifying
and creating a framework for analyzing the five forces, emphasizing the importance of
ongoing analysis for effective strategy development.
The five forces are:
Supplier Power: Suppliers with few substitutes, unique offerings, or high switching
costs wield significant power, potentially raising prices or reducing quality. Mutual
dependence can balance power, as seen with some auto part suppliers and car companies.
Buyer Power: Buyers have power when they have many choices and low switching
costs, allowing them to influence prices and product offerings. This power increases with
fewer buyers or easily substituted products. Price sensitivity also plays a role, as seen in
the fashion industry's reliance on promotions.
Competitive Rivalry: Competition among existing companies can be intense,
leading to price wars, heavy marketing, and a focus on even small advantages. This rivalry
is fiercer with more competitors, a stagnant market, or similar products. Examples include
Pepsi vs. Coca-Cola and Nike vs. Adidas.
Threat of New Entrants: New competitors can impact profits. Barriers to entry,
such as economies of scale, strong brands, high capital requirements, and regulations, can
deter new entrants Licenses, safety standards, quality regulations, etc. can create barriers,
making it difficult for new companies to enter the market.
Threat of Substitutes: Substitute products or services can meet similar customer
needs. Netflix replacing cable TV is a prime example. The threat is higher with favorable
pricing and comparable quality of substitutes, and when switching costs are low, as seen
with ride-sharing apps replacing traditional taxis. [27]
2.5 Conclusion and Recommendations
The issue of price manipulation in monopoly markets presents serious challenges
for consumers, businesses, and overall economic stability. When monopolistic firms
control prices without competition, they often inflate costs, restrict supply, and create
unfair market conditions. This leads to higher prices for consumers, reduced access to
essential goods and services, and slower economic growth. Furthermore, unchecked
monopolies can discourage innovation, as firms with no competition have little incentive
to improve products, reduce costs, or invest in new technologies. Over time, these practices
harm both consumers and the economy by reducing efficiency and limiting opportunities
for new businesses to enter the market.

22
 To address these challenges, policymakers must implement effective antitrust
regulations to prevent firms from abusing their market power. Stronger consumer
protection laws can ensure fair pricing and increase transparency in how prices are set. In
industries where monopolies are necessary, such as utilities and pharmaceuticals,
government oversight and price control mechanisms can help prevent excessive pricing
while maintaining incentives for continued investment and research. Additionally,
encouraging market liberalization—such as reducing barriers for new businesses—can
promote competition and drive down prices.
Another key strategy is fostering public-private partnerships in sectors where
government intervention is needed but private sector innovation is beneficial. By working
together, governments and businesses can create a balance that protects consumers while
allowing companies to grow. Finally, improving market transparency through better
information-sharing and stricter monitoring can help prevent price manipulation and ensure
fair competition.
Overall, achieving a well-balanced market structure requires a combination of
competition, regulation, and innovation. Governments, businesses, and consumers must
work together to prevent monopolistic abuse while promoting a fair, efficient, and
sustainable economy. By implementing these strategies, policymakers can create markets
that encourage fair pricing, better product quality, and long-term economic growth. [28]

23
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