P3, D3: The Five Types Of Market Structures

An oligopolistic market is one that has several dominant firms with the power to influence the market they are in; an example of this could be the supermarket industry which is dominated by several firms such as Tesco, Sainsbury’s, and Waitrose etc... Furthermore an oligopolistic market can be defined in terms of its structure and its conduct, which involve various different aspects of economics.

A major feature of an oligopoly market is that any singular firm has the power to set market prices. This is evident in the example of Coles and Woolworths in Australia as they dominate the market share with 72.5%. Due to there only being a small number of firms, they are able to set their prices and change price and

This is where industry regulations come. The regulations discourages the monopolies and oligopolies from charging unfair prices for their products.

1. Describe each market structure discussed in the course (perfect competition, monopolistic competition, oligopoly, and monopoly) and discuss two of the market characteristics of each market structure.

Market structure is the physical characteristics of the market within which companies react. This means that there are different kinds of market structure based on how companies work together within a particular industry. Location and product have the most to do with determining the market structure. There are four defined market types. The first market structure is called the perfectly competitive market. The second market is called a monopoly market structure. The third market is called monopolistic competition market structure. The final market is called oligopoly market structure. Each market structure is different and both benefits and disadvantages

Competition within the industry as well as market supply and demand conditions set the price of products sold.

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.

So firms in those industries can, to one degree or another, influence total supply through their own output decisions. In changing market supply, they also can influence product price. Firms with downsloping demand curves are price makers. (McGraw-Hill) Monopolists can charge higher-than-competitive prices that result in an under allocation of resources to the monopolized product. They can stifle innovation, engage in rent-seeking behavior, and foster X-inefficiency. Even when their costs are low because of economies of scale, there is no guarantee that the price they charge will reflect those low costs. The cost savings may simply accrue to the monopoly as greater economic profit.

The first concept I am going to discuss is an oligopoly. There are several characteristics that make up an oligopoly. One characteristic is that there are many firms in the industry but only a few firms that make up the majority of the market share. In the United States soda market, three firms (Coca-Cola, Pepsi, and Dr. Pepper Snapple Group) make up almost ninety percent of the market (Schiller, 246). Another characteristic is that in an oligopoly, the oligopolists have substantial influence over price (though one oligopolist is usually the price leader). This market power is determined by the number of producers in the industry, the

In differentiating between market structures one has to compare and contrast public goods, private goods, common resources, and natural monopolies. All of these are major factors that need to be considered.

Competition within the industry as well as market supply and demand conditions set the price of products sold.

Is a market where only few firms participate because of the high barriers at the entry. Each firm can influence the price, and affect rival’s firms, and every firm can act

In this type of market structure there are many buyers and sellers, and the organization can easily enter and exit the market. Instead prices are determined by market supply and demand. Also, in this type of market, businesses can’t control prices hence the output of the business is controlled deeply in a frame to make profit. Last but not least, in the perfect competition market, consumers are expected to receive goods at a much lower price than in any other market

There are different market structures prevalent in the world. For example, Monopolistic competition, Oligopoly, Monopsony, Oligopsony, Monopoly and Perfect competition are some of the chief examples of the market structure. Each has its own standing or meaning for the business. However, considering the Perfect competition and monopoly for this discussion, both structures remain at variance on different aspects.

b) In a monopolistic competition structure, although there are numerous firms, they carry different products. Due to product differentiation, each company is able to somewhat control their own pricing.