Market structure refers to the amount of competition that exists in the market between producers. The degree of competition can be thought of as lying along a continuum with very competitive markets at the end and markets in which no competition exists at all at the other end.
The different types of market structures are as follows:
1) Perfectly
Perfect competition describes a market structure where competition is at its greatest possible level. To make it more clear, a market which exhibits the following characteristics in its structure is said to show perfect competition.
Perfectly have the following characteristics:
Have large number of firms.
Products are homogenous (identical) so customers have no reason to express preference
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3) Monopoly
Pure monopoly is where only one producer exists in the industry.
In reality it rarely exists – always some form of substitute available.
Monopoly exists, therefore, where one firm dominates the market.
Forms may be investigated for examples of monopoly power when market share exceeds 25%.
Summary of characteristics of firm exercising monopoly power would be:
Price – could be deemed too high, may be set to destroy competition price discrimination possible.
Efficiency – could be inefficient due to lack of competition or could be higher due to availability of high profits.
4) Oligopoly
An oligopoly is a market structure in which a few firms dominate. When a market is shared between a few firms, it is said to be highly concentrated. Although only a few firms dominate, it is possible that many small firms may also operate in the market.
Competition between the few may be a large number of firms in the industry but the industry is dominated by a small number of very large producers.
Concentration ratio – the proportion of the total market sales (share) held by the top 3,4,5 etc of firms:
It features of an oligopolistic market structure:
Price may be relatively stable across the
Firm= AT&T Wireless-Oligopoly market structure=There are a very limited number of sellers, and immense number of consumers that demand goods and services. There are a small number of large firms that dominate/lead the industry. http://www.buzzle.com/articles/oligopoly-examples.html
Along these lines, the state of perfect competition that items must be indistinguishable from firm to firm is not met. The restaurant, apparel and shoe commercial ventures all display monopolistic competition. Firms inside those businesses endeavors to cut out their own particular sub industries by offering products or services not copied by their rivals. From numerous points of view, monopolistic competition is nearer than oligopoly to perfect competition. Boundaries to section and exit are lower, singular firms have less control over business sector costs and purchasers, generally, are learned about the contrasts between firm’s products. Monopoly and oligopoly are counterpoints to monopoly and oligopoly. Rather than being comprised of numerous purchasers and couple of buyers. These extraordinary markets have numerous dealers however couple of purchasers. The resistance business in the U.S. constitutes a monopoly; numerous organizations make products and services and endeavors to offer them to a particular purchaser, the U.S. military. A case of an oligopoly is the tobacco
In a monopolistic structure, there is a high degree of competition but less perfect competition (Baker College, 2016). An oligopoly market where there is little competition but more than a monopoly. In a monopoly, firms face no competition (Baker College, 2016).
An oligopoly usually consists of two to ten companies that are selling products with little to no differentiation. While the companies do hold some control over the price of the product they are selling, it is mostly dependent of the pricing of the competitors’ product. The companies in an oligopoly rely heavily on advertising and marketing their products to appeal to consumers. This is because all the companies in the oligopoly have to try to stay a step ahead of their competitors in order to appeal to consumers (S, S.). An example of an oligopoly is the cell phone industry. Verizon, AT&T, Sprint, and T-Mobile are the four dominating competitors in the market. These four companies are the only ones offering a reliable plan, at a (not so) decent price. They are constantly advertising, it seems as if every other commercial and ad you see is for one cell phone company or another, for one outrageously expensive plan or another. This goes to show that just because there is some semblance of competition between companies in a market, does not mean that consumers will be receiving a fair price on a product or
What is a perfectly competitive market? A perfectly competitive market is defined as something that occurs in an industry when that industry is made up of many small firms producing homogeneous products, when there are no impediment to the entry or exit of firms, and when full information is available (Baumol and Blinder, 200). In other words, when competition is at its greatest possible level, it describes a market structure in a perfect competition. A perfect competitive market consists of many buyers and sellers and therefore each buyer or seller is a price taker. All sellers tend to supply the same identical product. When four conditions are satisfied, a market is said to operate under perfect competition. We need to be able to define and explain the four conditions which are numerous small firms and customers, homogeneity of product, freedom of entry and exit, and perfect information.
An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies. Although firms in oligopolies have competitors, they do not face so much competition that they are price takers (as in perfect competition). Hence, they retain substantial control over the price they charge for their goods (characteristic of monopolies).
Economics can relate to competition as well as choice in the world of healthcare. For example market concentration in healthcare is when there are only a select few companies who produce and sell their products to the majority of the healthcare facilities around the country. In other words, these products may be limited and not many companies may make them, so selling them to most of healthcare facilities will create a larger selling market for them. Therefore, it is a useful economic tool because it reflects the degree of competition within the healthcare market. According to Riley (2011), “If concentration is low, than the industry is considered to be competitive and if the concentration is high, than the industry will be
Market structure is defined as the particular environment of a firm, the characteristics of which influence the firm’s pricing and output decisions. There are four theories of market structure. These theories are: &n The theory of pure competition is a theory that is built on four assumptions: (1. There are many sellers and many buyers, none of which is large in relation to total sales or purchases.
Monopolies are when there is only one provider of a specific good, which has no alternatives. Monopolies can be either natural or artificial. Some of the natural monopolies a town will see are business such as utilities or for cities like Clarksville with only one, hospitals. With only one hospital and there not being another one for a two hour drive, Clarksville’s hospital has a monopoly on emergency care, because there is not another option for this type of service in the area. Artificial monopolies are created using a variety of means from allowing others to enter the market. Artificial monopolies are generally rare or absent because of anti-trust laws that were designed to prevent this in legitimate businesses. However, while these two are the ends of the spectrum, the majority of businesses wil...
However, there are still some companies try to monopoly the market. In theory, monopoly is a single firm controls the whole output of the industry. According to The Economic Times, the definition of monopoly is “a situation in which a single company or group owns all or nearly all of the market for a given type of product or service.” Take an example of UK, a legal monopoly can occur when a firm has more than 25% of the total market; if this share exceeds 40%, then the monopoly is called dominant. In the situation in most countries, monopoly is illegal because it is harmful to the society.
There are four different categories into which economists classify industries. These categories are perfect competition, monopolistic competition, oligopoly, and monopoly. Each of these four categories has its own unique characteristics. Perfect competition has an unlimited number of firms, while a monopoly has one single firm, and an oligopoly consists of a small number of interdependent firms. The demand curve of an oligopoly depends on how firms choose to deal with their interdependence with the other firms in the industry. A firm within an oligopoly market can choose to cooperate with other firms in the industry, which is illegal, or the firm can choose to compete against the other firms. An oligopoly produces either differentiated products or homogenous products. In an oligopolistic market, entry barriers, which prohibit new firms from entering the industry, are present. Examples of entry barriers include patents, brand loyalty and trademarks. Long-run economic profits are possible for an oligopoly, and non-price competition is a significant way to compete with other firms in the same market. Most of the non-price competition in an oligopoly comes from product differentiation. The cereal manufacturing industry is an oligopolistic market because it exhibits many of these traits.
Perfect competition and monopoly are two extremes of market structure. Evaluate the statement by analyzing contrasting features and equilibrium price and quantity determination process under these two types of market. Illustrate your discussion with the help of real world examples.
This is a very important market structure, where there are a large number of firms, all of them fairly small compared to the size of the total market and it’s easy for new firms to join or leave the industry as the barriers are low. The perfect competition is a market where all firms produce a homogeneous product, in other words, the products are identical, and there is no advantage for existing firms, as every producer competes on equal terms. In the assumption of perfect competition, there are lots of buyers and sellers, an ample market knowledge and prices are determinate by supply and demand.
Market structure can be defined as a “set of buyers and sellers, which decided the price of goods and services. The basis of market structure is the influence the behaviour which results in the firms working in that particular market”. (www.policonomics.com, 2014)
Market structure is defined by the number of sellers in the market, the buying and selling strength of these sellers and their ability to affect prices, the characteristics of the competition, the differentiation or otherwise of the products, and ease of entry into, or exit from, the marketplace.