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There are two related but different approaches to the exercise of monopoly power. One approach is to state the price of the product, then produce only as much as can be sold at that price. This approach is most suited to a manufacturing operation, in which a list price is often established for an entire year, and production levels are adjusted during the year to ensure that there is no overproduction of the product. This approach can be summarized as raising the price, then restricting the output.

However, not all producers can schedule their output quite so precisely. In the case of agricultural products, crop sizes vary with the weather and other circumstances, and cannot be tailored to suit a predetermined price – in such cases, there is a risk of overproduction driving prices downwards. To deal with this, producers sometimes hold part of their output off the market, so as to prevent prices from falling. In some cases, such as Brazilian coffee, part of a large crop is actually destroyed, while in other cases, such as Canadian wheat and industrial skim milk powder, it is put into storage, usually with the assistance of government agencies. This approach can be summarized as one of restricting the supply so that the price moves to a higher level on its own, in the marketplace.

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