Different Types Of Market Structures

1) An Oligopolistic market structure is a structure where very few large businesses sell a particular standard Good or differentiated Good, and to whose market entry proves difficult. This in turn, gives little control over product pricing because of mutual interdependence (with the exception of collusion among businesses) creating a non-price competition meaning they are the ‘price setters’. A good rule to help classify an

Two different market structures are monopoly and oligopoly. Oligopoly is a type of monopoly but isn’t exactly the same. Monopoly is the structure that most businesses have which doesn’t have much competition. Oligopoly is a rather difficult business structure for new companies to join.

The organization and characteristics of a specific market where a company operates is referred to as market structure. While markets can basically be classified by their degree of competitiveness and pricing, there are four types of markets i.e. perfect competition, monopolistic competition, monopoly, and oligopoly. In perfect competition markets, many firms are price takers whereas monopolistic competition markets are characterized by the ability of some firms to have market power. In contrast, oligopoly markets are those in which few firms can be price makers while monopoly market is where one firm can be a price maker.

The four defined market structures include perfect competition, monopoly, monopolist, and oligopoly. Although firms within these four different structures compete within the economic market together, each have their distinct characteristic. Perfect competition includes producers who all produce the same good. When looking at perfect competition you will see that both the buyers and sellers are price takers. The agricultural market is one of the few perfectly competitive markets. A monopoly consist of one product being sold by one seller. In a monopoly one firm controls the market. Monopolies have high entry barriers eliminating competition and product duplication. If an artist has the ability to produce original sculptures that no one can duplicate, then they have a monopoly.

Monopolies are a group of business people who act as one. Any firm that has a monopoly structure will have the most price control for its goods. The firms that operate in competitive structures will have no control over their prices. A firms’ capacity to control the prices of its goods is called price management. This is a critical element in market structure. Monopolies have no public ownership. “When the competition is low and a company is dominating the demand curve it creates a monopoly because

Business in any city are challenging commodities that produce gain for the population. This city growth is well developed and incumbent by the market structure it abide by. The wisdom of crowds is based on the assumption that valuable knowledge in social systems frequently exists only as dispersed opinions, and that aggregating dispersed information in the right way can produce accurate predictions. A prediction market provides a vivid illustration of the power of the wisdom of crowds. (Qiu, L., Rui, H., & Whinston, A. B., 2014) This outline will break down the various market structures and will clarify all questions pertaining to the business in the city. The business will have to determine what model of market structure they will decide

More specifically, a Monopoly market structure is one where a single firm is the seller of a product in a market which therefore meaning it has the full market shares in a particular market. Monopolies are also characterised by a lack of competitors in a market, or viable substitutes to a good or service. Therefore, a firm in a monopoly enjoys the power of being a price maker in a market as it has no close competitors to influence price.

A monopolistic competition describes a common market structure in which firms have many competitors or sellers, but each one sells a vaguely distinctive product or service. One of this market structure’s characteristics is that each individual firm makes independent decisions about price and output, based on its product, its market, and its costs of production (Economics Online, 2015). Another characteristic is there is freedom to enter or leave the market, since there are no major barriers to entry or exit. The opposite of this market structure is an oligopoly. Oligopoly means few sellers. Oligopoly is the market structure in which there are only a few firms or a few firms dominate the market (Amacher & Pate, 2013). In an oligopolistic market, each seller supplies a large portion of all the products sold in the marketplace. In addition, because the cost of starting a business in an oligopolistic industry is usually high, the number of firms entering it is low.

A perfectly competitive market is one where competition between firms is intense; the market is considered concentrated. The characteristics of a perfectly competitive market include having a large number of firms in the market, homogeneous products, no entry or exit barriers, no non-price competition or external costs or benefits, perfect knowledge, and zero control over the market price or conditions. These characteristics create a condition in which the firms in a market act as price takers; in other words, no single firm has any role in setting the market price and therefore must take their prices from the industry.

Perfect competition: Perfect competition is an economic concept, there are lots of seller’s sells homogeneous products in the market and there are many buyers. There are no barriers to enter into the market. Furthermore both the buyers and sellers have good information regarding price so that sellers can offer a competitive price to the buyers and also buyers can compare the price to have the best choice.

Market structure from an economics perspective is defined as the characteristics of the market that impacts the behavior or way firms operate, which economists use to determine the nature of competition, and pricing tactics of businesses in the market. Within a market, the market structures are distinguished by key features, including the number of sellers, homogeneous or differentiated goods or services produced, pricing power, level of competition, barriers to entering or exit the markets, efficiency, and profits. The interaction and differences among these features resulted in four market structures of competition: perfect competition, monopolistic competition, oligopoly, and monopoly. Economist assembled the four market structures into two groups; perfectly competitive market and imperfectly competitive market, which are vastly distinct when it come to the different market competitions that need to be satisfied.

Market structure is about the number of competition that exists in a market among producers. The level of competition can be thought of as a continuous sequence with very competitive market at one end and the other end consist of market in which no competition exists. Market structure is important because of the implications it has for conduct and performance and the fact that it has an impact upon the strategic possibilities which faces the organization.

In this research essay, the key characteristic of four elemental market structures (i.e. monopoly, oligopoly, perfect competition or monopolistic competition) and their derivatives (i.e. differentiated oligopoly were identified and discussed. Meanwhile other doubts were addressed and being attended to.

It is important to keep in mind that this is a theoretical model. Real data does not exist, and the model does not precisely describe reality.” (Amacher & Pate, 2012) The perfect competition model is based on defined assumptions which prevent its adaptation into a real-life economy; however it is often described as the baseline model to compare all other structures. These assumptions are: (1.) Large volume of buyers and sellers: A perfect competition market has many buyers and sellers so none are able to influence the market. (2.) Homogenous products: All producers generate the same product with no differentiation. (3.) Excellent or perfect knowledge: Buyers and sellers have an extensive amount of information about the product and other producers. (4.) Free entry and exit into the market: Firms are able to allocate resources in and out of this market easily with little expense. (5.) Firms are able to quickly to respond to a changing consumer demand. (6.)Workers and other resources are easily moved in and out of the industry.

= competitive market is a market in which there are many buyers and many sellers so that each has a negligible impact on the market price.