A state monopoly can be characterized by its commercial behavior not being effectively limited by the competitive pressures of private organisations.
[6] This is especially the case if the state monopoly controls access to vital inputs essential to operating within the market.
[4][8] A state monopoly's ability to increase the price or quantity of goods and services provided, without a relational change in its own operating costs (coupled with maintaining this price or quantity at above a market clearing rate), demonstrates its ability to disregard any competitive forces within the market.
[9] A state monopoly also retains the ability to reduce service value, or impose restrictive terms and conditions, without experiencing a loss in market share.
In countries that are members of the OECD, sectors where there are state monopolies are usually those that are meeting the "needs of utilities and public services.
A state monopoly's market power and dominance can arise from its superior innovative capacity or greater performance.
Also, government monopolies on public utilities, telecommunications and railroads have historically been common, though recent decades have seen a strong privatization trend throughout the industrialized world.
For example, in Denmark, Finland, Iceland, Norway, and Sweden government-owned companies have monopolies for selling alcoholic beverages.
[27][28] This has been observed to result in more optimal outcomes for an economy, as resource allocation is no longer directed by legislative instruments or regulatory authorities.