Introduction
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.
A major issue for existing firms in some market structures is the entry of new competitors, and this is because of the potentially unfavorable effects new participants might have on the market 's real revenue and profits. Entry barriers are specifically designed to prevent new competitors from entering a profitable market freely. Based on the level of barriers, it can be relatively easy or difficult for new firms to enter the market. Therefore, high entry barriers may have a positive or negative influence a firm’s long-run profitability, cost
Oligopolistic markets, such as supermarkets or car manufacturing, can be defined in terms of market structure or in terms of market conduct.
The following case study is in regards of economic market structure. In the world of economics all businesses or companies rather, are categorized in certain market structures such as monopoly, oligopoly, or perfect competition, for instance, the market structure for restaurants. Most restaurants are considered monopolistic competition. Being that they all sell and serve food. They have to have instances that vary such as price, logos, servers, locations, décor, types of food, and hospitality.
There are four types of market structures: Monopolistic Competition, Monopoly, Oligopoly, and Perfect Competition. Monopolistic Competition is also known as competitive market. In this market structure, there are a large number of firms that produce similar but somewhat differentiated products for the same target customers. The market share is also divided among large number of firms making it difficult for one firm to become the market leader. On the other hand, Monopoly is a type of market structure in which only one firm controls the whole industry. There are strict barriers to entry for new firms due to governmental restrictions or the monopolistic power of the firm itself. In Oligopoly, the whole industry is dominated by a few large scale firms that set prices, introduce innovative products, and use heavy campaigns to attract buyers. All other small scale firms follow the changing market patterns set by these oligopolistic firms. Lastly, perfect competition is a market structure in which there are a larger number of firms that produce similar as well as differentiated products for
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.
Potential for new entrants - The primary prevention to entrance are higher barriers within industry with the threats of new entrants as competitors (Porter, 1998).
Explain the most important characteristic in perfect competition, monopolistic competition, oligopoly, and monopolies and relate the characteristic to how these firms can make profits in the short run. In your analysis, make sure to relate an example for each of the market structures listed and how it relates to the particular characteristics.
Both potential and existing competitors influence average industry profitability. The threat of new entrants is usually based on the market entry barriers. They can take diverse forms and are used to prevent an influx of firms into an industry whenever profits, adjusted for the cost of capital, rise above zero. In contrast, entry barriers exist whenever it is difficult or not economically feasible for an outsider to replicate the incumbents’ position (Porter, 1980b; Sanderson, 1998) The most common forms of entry barriers, except intrinsic physical or legal obstacles, are as follows:
I am Indian. My entire family is Indian. I am the very first child to have been born outside of India. My parents’ generation were the first to marry into non-Indian families. So America is pretty new for us. However, there isn’t really anything special about us coming to this country. My aunt came for school. My father came for school. My mother came because of my father. They all came by plane comfortably, and never experienced an adventure while coming into the US. It was the most boring travel story EVER.
“The General Prologue,” is the first selection in the The Canterbury Tales. It introduces the Miller in third person limited; where the narrator describes his physical features. Straight away the narrator creates the Miller’s image as “a stout churl” (26). This short distasteful diction implies that he is a “rude, coarse man”(26). Moving forward through the text, Chaucer adds details to support his statement. Not only does the Miller contain poor qualities, the Miller is all around hard-featured. He is symbolic to a lumberjack, who is “big of brawn, “big of bone,” and “broad of build” (26). The Miller’s beard is “as any sow or fox,” red (26). This simile adds support to his features of a lumberjack because most lumberjacks contain thick colorful beards. There is a mention “of the ram” that he “never fail[s],” which adds context to the symbolization of a lumberjack because most mountain men have either rams or bullhorn sheep.
An issue of distinguishing a fixed and a floating charge has considerable significance particularly for the parties involved in commercial relationships. It follows from the fact that under English law a fixed charge has a priority over a floating charge that means the former will prevail over the latter even though the company has granted a floating charge to the creditor prior to the creation of a fixed security. Another reason is that under the provisions of Insolvency Act 1986 holders of a floating charge are placed in a less favourable position than the holders of a fixed charge particularly due to sec. 176 of the Act which prevents the distribution of a certain portion of the company’s net property to the holder of a floating charge
Again, with high entry barriers they are not bombarded with other firms coming and going from their market. (Samuelson and Marks, 2010).
If an industry is profitable, it will become a magnet to attract more competitors looking to do same business with us. If it is easy for these new entrants to enter the market, this poses a threat to the firms already competing in that market. Threat of new entrants is one of the forces that shape the competitive structure of an industry (Marc, 2014). A high threat of entry means new competitors are attracted by the profits of the industry and can enter the industry easily. New competitors entering the marketplace can make the market share and profitability of existing competitors more threaten cause the existing competitor to make some changes to existing product quality or price levels. A high threat of new entrance can make an industry more competitive and decrease profit potential for existing competitors whereas a low high threat of new entrance can make an industry less competitive and increases profit potential for the existing
Porter (2008) argues that the threat of entry “puts a cap on the profit potential of an industry … [and] incumbents must hold down their prices or boost investment to deter new competitors” (p. 81).
Markets differ in a variety of ways including the degree of concentration and competitiveness, a fact which is reflected in the concept of ‘market structure’. Economists’ models link the structural characteristics of a market to the behaviour of firms in that market and subsequently to their performance. A key question therefore is how far a firm’s strategic decisions are shaped by the structure of the market in which it operates.
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.