The Primary Market Structures And Marketing Efforts, And The Principal Agent Problem

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Summary This report looks at the four primary market structures, with a focus on two. Within each of these two market structures, this report will examine an industry, summarizing industry operations and characteristics, advertising and marketing efforts, and the principal-agent problem. Market Structures There are four basic market structures, each determined by the number of firms in the market and the dynamics of competition. They are perfect competition, monopoly, oligopoly, and monopolistic competition. (Flynn, n.d.) A market structure with perfect competition has a number of firms all offering an identical product. A firm with a monopoly has no competition; this market structure is also called imperfect competition due to the…show more content…
The company’s name became synonymous with film. When Polaroid introduced instant film, it too had a corner on its market as the only company with this technology. In effect, a monopoly restricts free trade as it has no competition. A monopolistic firm is a price setter, having the ability to set the price for a product that has no competition and no readily-available substitutes. (Price Maker, n.d.) Another characteristic of a monopoly is its barriers to entry. These can include high start-up costs, control of natural resources, government regulations or restrictions, patents or copyrights, and exclusive rights. A perfect example of a monopoly is a utility; this report will analyze electric utilities as a monopoly. Perfect Competition Perfect competition, at the other end of the spectrum, has a large number of firms that all make or sell the exact same product, such as beef or milk. These firms are price takers as there is no one firm that can influence price. (Price Taker, n.d.) If one firm tried to raise prices or cut back production to influence supply and demand there are several other companies to which consumers can take their business. Other characteristics of perfect competition include little or no exit or entry barriers, small market share for each competitor, and price transparency to consumers. (Perfect Competition, n.d.) To better understand the concept of perfect competition,
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