MARKET STRUCTURES

Ramaswamy Uggem

Market StructureMarket structure is best defined as the organisational and other characteristics of a marketIt refers to the number of competing firms in the market

It is defined by 3 characteristics: 1.The number of firms in the market 2.The ease of entry and exits of firms 3.The degree of product differentiation

4 Market structures

Perfect competition

Monopolistic

competitionOligopoly Monopoly

Least Most

Competitiveness level

PERFECT COMPETITIONPerfect competition is an economic model of a market situation characterized by a large number of firms all making the same product

Features of perfect competition:Many firms.Freedom of entry and exitAll firms produce an identical or homogeneous product.All firms are price takersEg::Banks, Vegetables Market, Travel Agencys…

Monopolistic CompetitionMonopolistic competition occurs when there are many firms in the industry, each selling a slightly differentiated product

Features of monopolistic competition:A large number of firmsEasy entryDifferentiated productsEg::Novels,films

OligopolyA market in which there are a few large firms competing with one another

The main features of oligopoly:An industry which is dominated by a few firms.Interdependence of firms, firms will be affected by how other firms set price and output.Barriers to entry, but less than monopoly.Different (Differentiated oligopoly) / homogeneous (Pure oligopoly) Products advertising is often important

Eg::TCS,Vizag Steel (AP),Oil

MonopolyMonopoly is defined as a single seller of a product. i.e. 100% of market shares

Characteristics of Monopoly:There is a single sellerThere are no close substitutes for the firms productThe firm is a ‘price maker’No close substitutesEg: Indian Railways,State E-city Boards,

No.of Firms

Buyers Product s

Ads Entry intoMarket

Examples

PerfectCompetition

Many Many Homogeneous

None Easy VegetableMarkets

Monopolistic Competition

Many Many Differentiated

Some Easy Novels

Oligopoly Few Many Differentiated/homogeneous

Some more

Hard Automobiles,Steel,oil

Monopoly One Many no close substitutes

None Very Hard

Indian Railways

Thank youhave a nice Day Syndians….