Group 6 Market Structure

Edra, CZheimer
Barcelo, Crystal
Sibulan, Jovelyn
La Morena, Clarisse
Legazpi, Audrey

MARKET STRUCTURE
What is the Market Structure?
In economics, best defined as the organizational and other characteristics that significantly affect the
behavior and interaction of buyers and sellers of a market including:
Number and size of sellers and buyers
Type of the product
Conditions of entry and exit
Types Of Market Structure
1.Pure (perfect) Competition
2.Monopoly
3.Monopolistic Competition
4.Oligopoly

Pure (perfect) Competition

Features of Perfect Competition
Number and size: Many small firms
Type of the product: an identical or homogeneous product (no differentiation)
Conditions of entry and exit: Freedom of entry and exit; this will require low sunk costs.
Control of Price: no one can affect the market (Freedom Competition)
Disadvantages of Perfect Competition
1. Undifferentiated products- all homogeneous.
2. Lack of investment of Research and Development(R&D)
3. No incentive to develop new technology
Advantages of Perfect Competition
1. They allocate resources in the most efficient way
2. There is no information failure as all knowledge is spread out evenly
3. Only normal profits made just cover their opportunity cost

Monopoly
Number and size: only one provider of a product or service (firm and industry are synonymous)
Type of the product: unique product: no close substitutes
Conditions of entry and exit: Entry or exit is blocked. Monopolies also need barriers to entry to protect
them from new firms entering the market. Barriers to entry can include brand loyalty through
advertising and economies of scale.
Control of Price: is the price maker

Disadvantage to Monopoly
Group 6 Market Structure
Edra, CZheimer
Barcelo, Crystal
Sibulan, Jovelyn
La Morena, Clarisse
Legazpi, Audrey

MARKET STRUCTURE
1. Higher Prices

2. Higher Prices to suppliers

3. Lack of incentives, may have less incentive to work at product innovation

4. Charge higher prices to suppliers.

Advantages of Monopoly

1. If there are significant economies of scale, a monopoly can benefit from lower average costs. This can
lead to lower prices for consumers.

2. Monopolies make supernormal profit which can be invested in Research & Development. This is
important for industries like medical drugs.

Monopolistic Competition - a market structure which combines elements of monopoly and competitive
markets.
Number and size: many firms
Type of the product: Produce differentiated products.
Conditions of entry and exit: Freedom of entry and exit
Control of Price: little price making power
Disadvantages of Monopolistic Structure
1. due to differentiated products chances are companies may charge more than fair price from the
consumers for extra features in product
2. in order to differentiate their products from other companies add irrelevant features
3. In monopolistic competition companies spend too much money on advertising increased cost to
consumer in the form of higher price for the product.
Advantages of Monopolistic Structure
1. In case of monopolistic competition buyers get plenty of options due to differentiated products
2. They tend to advertise about it through various channels of communication which helps the customers in
making informed decision by comparing the features of various products.
3. It helps in innovation because the only thing which will help the company in surviving in case of
monopolistic competition is to constantly add new features to product

Oligopoly - most common market structure

a market is run by e.g. supermarkets, petrol, car industry e.t.c. that together control the majority of the market
share
Group 6 Market Structure
Edra, CZheimer
Barcelo, Crystal
Sibulan, Jovelyn
La Morena, Clarisse
Legazpi, Audrey

MARKET STRUCTURE
Duopoly, a special case of an oligopoly with two firms.

Monopsony, when there is only a single buyer in a market.

Oligopsony, a market where many sellers can be present but meet only a few buyers.
Number and size: a small number of firms
Type of the product: Differentiated products, advertising is often important
Conditions of entry and exit: Barriers (huge capital investment may be the barriers to enter) to entry, but
less than monopoly.
Control of Price: how other firms set price and output
Disadvantages of Oligopoly

1. Difficult To Forge A Spot

2. Limited Choices

3. Fixed Prices Are Bad For Consumers

4. No Fear Of Competition leads to lack of innovation

Advantages of Oligopoly

1. High Profits

2. Simple Choices

3.Competitive Prices
Group 6 Market Structure
Edra, CZheimer
Barcelo, Crystal
Sibulan, Jovelyn
La Morena, Clarisse
Legazpi, Audrey

MARKET STRUCTURE

Sources:

http://www.yourarticlelibrary.com/economics/market/market-structure-meaning-characteristics-and-forms-
economics/28736/
http://www.economicshelp.org/microessays/markets/
http://www.slideshare.net/mithileshtrivedi581/market-structure-and-types-of-market-strucyure
http://www.economicshelp.org/microessays/markets/perfect-competition/
http://www.economicshelp.org/microessays/markets/monopoly-diagram/
http://www.economicshelp.org/blog/311/markets/monopolistic-competition/
http://www.economicshelp.org/microessays/markets/oligopoly/
https://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
http://www.letslearnfinance.com/advantages-and-disadvantages-of-monopolistic-competition.html
http://thenextgalaxy.com/the-advantages-and-disadvantages-of-ogligopoly/