Forms of Industrial Organziation

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Forms of Industrial Organization Economists group industries into four distinct market structures: monopoly, oligopoly, monopolistic competition, and competitive market. These four market models differ in several respects: the number of firms in the industry, whether those firms produce a standardized product or try to differentiate their products from those of other firms, and how easy or how difficult it is for firms to enter the industry (McConnell & Brue, 2004). This paper further defines each market structure and provides an example of a company representing each market structure. Monopoly A monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to…show more content…
Either entry to or exit from monopolistically competitive industries is quite easy” (McConnell & Brue, 2004, p. 413). Nike running shoes are an example of monopolistic competition where Nike states that their Dynamic Ride adapts to every stride for customized support and excellent cushioning of a runner’s foot (Nike, Inc., 2010). Nike is clearly distinguishing its running shoe designs from those of competitors. According to the Campaign for Labor Rights, the cost to manufacture a pair of Nike shoes is about $3.50 while retailing for over $100 (Glenn, 2004). Nike’s competitors such as Adidas, Mizuno, and Saucony also retail many running shoe models for over $100. Nike employs competition-based pricing as their shoes are priced within 10% of competitor’s. Competitive Market A competitive market is essential to preserve constancy and profit in business where there are like businesses. By having a competitive market it permits businesses to modify items and prices dependent on the needs of the consumers, competition and profit and sales of a business. Examples of competitive businesses are the fuel, vehicle, food chains, technology and office supply chains and cable. Walmart is an example of a competitive market because of the huge number of

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