The Market Structures

Lesson 3
Market Structure

 Is a classification system for the key traits of a market,

including the number of firms, the similarity of the
products they sell, and the ease of entry into and exit
from the market structure
Types of Market Structure

1.Perfect competition
2.Monopoly
3.Monopolistic competition
4.Oligopoly
1. Perfect Competition

Is a market structure characterized by

1. Large number of small firms
1. Each firm has no significant share of total output
and therefore no ability to affect the product’s
price
2. Homogenous/Identical products
3. Very easy entry and exit from the market
Examples:
 Agricultural sector
 Street food vendors
2. Monopoly

Is a market structure characterized by

1. A single seller or producer
2. A unique product
3. Impossible entry into the market
1. Sole ownership of a vital resource
2. Legal barriers like government franchise and
licenses
3. Economies of scale
Examples:
3. Monopolistic competition

Is a market structure characterized by

1. Many large firms
2. Differentiated products
3. Easy market entry and exit

Under this structure, rivalry centers on non – price

factors in addition to price competition.

Product differentiation – is the process of creating

real or apparent difference between goods and
services sold in the market
4. Oligopoly
Is a market structure characterized by
1. Few sellers
1. These firms are so large relative to the total market that they
can affect the market price
2. Either a homogenous or differentiated product
3. Difficult market entry
1. Financial requirements
2. Control over essential resources
3. Patent rights
4. Economies of scale
Examples:
 Cable Television Services
 Entertainment Industries (Music and Film)
 Airline Industry
 Pharmaceuticals
 Computer & Software Industry
 Cellular Phone Services
 Smart Phone and Computer Operating Systems
 Oil and Gas
 Auto Industry
Special Types of Market Structure
1. Bilateral monopoly – is a market condition comprising
one seller and only one buyer
2. Bilateral oligopoly – is a market condition with a
significant degree of seller concentration and a
significant degree of buyer concentration
3. Duopsony – is a market situation in which there are
only two buyers but many sellers
4. Duopoly – is a subset of oligopoly describing a market
situation in which there are only two suppliers
5. Monopsony – is a form of buyer concentration, i.e a
market situation in which a single buyer confronts
many small suppliers