Monopoly, Oligopoly, Monopolistic Competition

Chapter 9, Section 2Monopoly, Oligopoly, Monopolistic CompetitionMonopolyMonopoly situation in which a single supplier makes up an entire industry for a good/service with no close substitutes. Ex. Local electric company.Characteristics:Single seller only one seller exists for that productNo substitutes no close subs for that good/serviceNo entry protected by obstacles to competition that prevents others from entering that market.Almost complete control of price by controlling the availability of their product, they can control the market price for it.

Monopoly ContTypes of Monopolies:Natural Monopoly Govt has given exclusive rights to a company. Ex. Utility providers, bus services, cable TV, etc.Technological Monopoly when you invent something, you can get a patent (exclusive rights to that invention) or a copyright (rights to sell literature, song lyrics, for the life of the author plus 70 years.)Government Monopoly like a natural monopoly but the govt holds this monopoly. Ex. Health care in Canada, construction and maintenance of roads, bridges, etc in America.Geographic Monopoly when a markets profitability is limited due to its geographic location. Ex. Grocery store in remote part of Alaska.

OligopolyOligopoly industry dominated by a few suppliers who exercise some control over price. See page 244, figure 9.8

OligopolyCharacteristics:Domination by a few sellers few firms control 70-80% of marketBarriers to entry high costs involved in starting business.Identical or slightly different products things like airline travel, cars, kitchen appliances.Nonprice-competiton ads emphasize the minor differences and attempts to build customer loyalty. Product differentiation (minor differences in quality and features to try to be different from competitors.)Interdependence a change by one company will cause the other companies to react by copying.

Cartel arrangement between groups of businesses to reduce competition, allowing them to greater control prices of their products. Ex. Drug cartels in Mexico, South America.Monopolistic CompetitionMonopolistic competition large number of sellers offer similar but slightly different products. Ex. Toothpaste, cosmetics, clothes.

Characteristics:Numerous sellers no single seller or small group dominates the market.Relatively easy entry into that marketDifferentiated products each supplier sells a slightly different product.Nonprice-competiton businesses compete with each other by using product differentiation and by advertising.Some control over price by building customer loyalty they have some control over the price of their product.