ABSTRACT
Monopoly, the control of an industry by a single seller is one situation in which free markets are likely to result in socially undesirable outcomes. The existence of monopoly in the pre-reform Russian economy holds implications for the analysis of reform and the role of demonopolization. Concentration ratios or employment ratios calculated at the enterprise level are inappropriate measures of monopoly power in the pre-reform Russian setting, since the former industrial branch ministries provided a built-in cartel structure for the production of many goods. The outputs of an enterprise deemed to be a monopolist are subject to price regulation, and overall profitability limits can also be established. An enterprise that exceeds those limits can have its excess profits confiscated, even if they are not attributable to the goods for which it is considered to have a monopoly position.
