Market structures
Characteristics of different market structures
| Perfect competition | Usually has a large number of buyers and sellers. Presence of homogeneity of the product-specific product It usually has free entry and exit of the organization. Tend to have good knowledge of the market. An effective price control system is absent. |
| Monopolistic competition | It is featured by having large numbers of buyers and sellers. The buyer also gets accurate and perfect information. Presence of low entry and elements of exit barriers Another feature of this market is having similar but differentiated items/goods. |
| Oligopoly | interdependence is the vast feature of this market in terms of decision making. Presence of group behavior and significant competition Usually has barriers to entry of firms. The issue of lacking uniformity. Existence of pricing rigidity. |
| Monopoly | It mostly has one profit maximizer. There is a single price maker. A lot of high barriers to entry Presence of a single seller. It is dominated by price discrimination. |
Perfect competition usually is characterized by having numerous competing firms due to the same fields (Sharma, 2020). It is essential to understand that they also have similar products sold and are characterized by online shopping entity. An excellent example of a reputable firm is Amazon. It is a fact that this market structure offers Amazon the chance to have an equal market share as there is a lot of high competition. Amazon, as a company, tends to give its buyers have full information about their online goods and services.
Monopolistic market structure is highly characterized as having many producers and also consumers in that particular market. Fast food companies are usually associated with this market structure, and the reason is that no business has total control over the market price, which means there is always changing winners and losers in the market. More importantly, the reason as to why food companies fall under this market is that consumers perceive that there are non-price differences among the market competitors’ products. An example of a US company is McDonald, who is famously known to sell burgers whereby they get massive competitive for the similar, for instance, Burger King, who are closet market competitors.
Competition Oligopoly is usually known as the market structure that has a small number of firms, and a good example isCoca Cola Company, which shows dominance in the beverage industry regardless of other small competitive firms that produce carbonated drinks like F&N in Malaysia. In this example, both Coca Cola and Pepsi Co. are the two companies that dominate this industry all over the world.
Monopoly market structure, for example, in the US, the American Tobacco Company tends to dominate the market and control the prices. It is essential to understand that there is no competition in this market hence making this company suitable for this market structure.
Summary section
- In any market structure, it usually affects the supply of a different item in a specific market.
- If the competition is high, then there is the presence of a high supply of a product by many companies.
- Perfect competition market structure best fits producer and consumers as there is a large number of buyers and sellers.
- Many firms tend to apply marginal analysis mainly as a decision-making tool with intent to assist in maximizing their potential profits.
- Large firms in the US prefer a monopoly market to reduce competition and dominate the pricing.
Marginal analysis in this respect usually assumes that rational decisions are formed when the additional benefits result from particular a decision which exceeds the marginal cost of that specific decision. In that aspect, firms can utilize marginal revenue and marginal cost so that they can determine their primary output and pricing decisions.
Industry perfect competition
Monopolistic competition
Oligopoly market structure
Monopoly market structure
Reference
Sharma, S. P. (2020). Unit-1 Perfect competition: firm and industry equilibrium. Indira Gandhi National Open University, New Delhi.