Failure monopoly

Failure Monopoly is a term used in Economics to describe a particular form of monopoly.
A failure monopoly arises where a monopoly product or service is created by a provider who cannot recoup the cost of it, so that where a trader holds a failure monopoly, the trader cannot actually make a return on the investment. The prohibitive cost of establishing the product or service results in a lack of competition for the product or service, as no one would be willing to set up in competition with the provider, thereby leaving the provider with a monopoly, but one that is uneconomic.
A Failure Monopoly does not, unlike a Compulsory Monopoly, arise from any form of coercion or legally-enforced privilege, but from an error in business forecasting or from a decision to make a wasteful disposition of resources. The establishment of a Failure Monopoly is against the economic interest of the provider.
The Channel Tunnel is an example of a failure monopoly, as the provider has the only tunnel under the English Channel, linking the United Kingdom and France. The cost of the Channel Tunnel is so high that no one has yet come forward to create a competing tunnel, hence leaving the owners with a monopoly of tunnels under the English Channel. However, if the value of the investment is written off, in whole or in part, it may be possible to make an Operating Profit from the monopoly, and the cost to a potential competitor would deter a competitor from entering into the market. However, a substitute service or goods provider may be able to compete with a Failure Monopoly, in the case of the Channel Tunnel, by providing a ferry service.
The Austrian Economist Ludwig von Mises provides a discussion of Failure Monopoly in Human Action

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