The provider receiving the monopoly privilege is insulated from direct competition and may therefore reap profits from it, especially in the early stages of the policy. Even legal monopolies (as well as natural monopolies) are subject to indirect competition from substitute goods, however. For instance, first-class mail delivery must compete against email and other communications services. To some extent, in fact, every good in the marketplace competes against the postal service for the customer's money (

Furthermore, the increased profits of the monopoly tend to evaporate over a longer period because of the adverse effects of such policies on production efficiency. Because the good is supplied only by one producer, there is no competition to discover possible improvements to the product or better methods of production or distribution. In short, the centralization of production interrupts the flow of useful economic information. The inverse relationship between centralization and information generation will be probed more deeply in Section 5; here we note merely that the decreased availability of information tends to create increasing inefficiencies, which in the long run impact not only the users of the good but also the monopolist's own profits. Even if the managers of a legal monopoly such as the postal service have the best of intentions, perhaps seeking to emulate the business practices of well-run private competitive companies, their operation becomes increasingly wasteful and unprofitable because they cannot know how to be efficient.

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