Market Structure
Market Structure
Market structure identifies how a market is made up in terms of: The number of firms in the industry
The nature of the product produced
The degree of monopoly power each firm has
The degree to which the firm can influence price
Profit levels
Firms behavior pricing strategies, non-price competition, output levels
The extent of barriers to entry
The impact on efficiency
Market Structure
More competitive (fewer imperfections)
Perfect Competition
Pure Monopoly
Market Structure
Less competitive (greater degree of imperfection)
Perfect Competition
Pure Monopoly
Market StructurePerfect
Competition
Pure Monopoly
Monopolistic Competition Oligopoly Monopoly
The further right on the scale, the greater the degree of monopoly power exercised by the firm.
Market Structure
Importance:
Degree of competition affects the consumer will it benefit the consumer or not?
Impacts on the performance and behavior of the company/companies involved
Market Structure
Characteristics of each model: Number and size of firms that make up
the industry Control over price or output Freedom of entry and exit from the industry Nature of the product degree of similarity of the
products in the industry (extent to which products can be regarded as substitutes for each other)
Market Structure
Characteristics: Look at these everyday products what type of market structure are the producers of these products operating in?
Remember to think about the nature of the product, entry and exit, behavior of the firms, number and size of the firms in the industry.
You might even have to ask what the industry is??Canon SLR CameraBananas
Mercedes CLK Coupe
Vodka
Electric
Guitar Jazz Body
Perfect Competition
One extreme of the market structure spectrum
Characteristics: Large number of firms Products are identical
consumer has no reason to express a preference for any firm
Freedom of entry and exit into and out of the industry
Firms are price takers have no control over the price they charge for their product
Each producer supplies a very small proportion of total industry output
Consumers and producers have perfect knowledge about the market
Monopolistic or Imperfect Competition
Characteristics: Large number of firms in
the industry May have some element of
control over price due to the fact that they are able to differentiate their product in some way from their rivals products are therefore close, but not perfect, substitutes
Entry and exit from the industry is relatively easy few barriers to entry and exit
Consumer and producer knowledge imperfect
Oligopoly
Competition between the few May be a large number of firms in the industry but the
industry is dominated by a small number of very large producers
Concentration Ratio the proportion of total market sales (share) held by the top 3,4,5, etc firms: A 4 firm concentration ratio of 75% means the top 4 firms
account for 75% of all the sales in the industry
Oligopoly
Music sales
The music industry has a 5-firm concentration ratio of 75%. Independents make up 25% of the market but there could be many thousands of firms that make up this independents group. An oligopolistic market structure therefore may have many firms in the industry but it is dominated by a few large sellers.
Market Share of the Music Industry 2010 IFPI: http://www.ifpi.org/site-content/press/20030909.html
Oligopoly
Features of an oligopolistic market structure:
Price may be relatively stable across the industry
Potential for collusion or conspiracy
Behavior of firms affected by what they believe their rivals might do interdependence of firms
Goods could be identical or highly differentiated
Branding and brand loyalty may be a potent source of competitive advantage
Non-price competition may be prevalent
Game theory can be used to explain some behavior
High barriers to entry
Monopoly
Pure monopoly where only one producer exists in the industry
In reality, rarely exists usually some form of substitute available!
Firms may be investigated for examples of monopoly power when market share exceeds 25%
Use term monopoly power with care!
Monopoly
Monopoly power refers to cases where firms influence the market in some way through their behavior determined by the degree of concentration in the industry
Influencing prices
Influencing output
Erecting barriers to entry
Pricing strategies to prevent or stifle competition
May not pursue profit maximization encourages unwanted entrants to the market
Sometimes seen as a cause of market failure
Monopoly
Origins of monopoly:
Through growth of the firm
Through uniting, merger or takeover
Through acquiring patent or license
Monopoly
Summary of characteristics of firms exercising monopoly power: Price could be deemed
too high, may be set to destroy competition (destroyer or predatory pricing), price discrimination possible.
Efficiency could be inefficient due to lack of competition (X-inefficiency) or could be higher due to
availability of high profits
Innovation - could be high because
of the promise of high profits,
Possibly encourages high
investment in research and
development (R&D)
Collusion possible to maintain
monopoly power of key firms
in industry
High levels of branding,
advertising
and non-price competition
TYPE OF MARKET STRUCTURE
Product No. of sellers
No. of buyers
Barriers to entry of exit from the industry
Relative influence over r the price of the product
Pure Competition
Homogenous Many Many None Little or no influence;price takers
Monopoly Unique One Many Very high Absolute influence; seller is price maker
Monopolistic Competition
Slightlydifferentiated
Many Many Low Strong influence; but usually a price taker
Oligopoly Slightly differentiated
Few Many Very high Very strong influence; usually a price maker with the others
Monopsony Usually unique
Few One Very high Absolute influence; buyer is price maker
Oligopsony Slightly differentiated
Few to many Few Very high Very strong influence-buyer; usually a price maker with the others
end
RA 7394 :The Consumers Act of the Philippines is the policy of the state to protect the interest of the consumer, promote his general welfare
and to establish standards of conduct for business industry.
1. The right to basic needs, which guarantee survival, adequate food, clothing, shelter, health care. Education and sanitation to health and life.
2. The right to safety, which is the right to be protected against the marketing of goods or the provision of services that are hazardous to health and life.
3. The right to information, which is the right to be protected against dishonest misleading advertising or labelling and the right to be given the facts and information needed to make an informed choice.
4. The right to choose, which is the right to choose products at competitive prices with an assurance of satisfactory quality
5. The right to representation, which is the right to express consumers interests in making and execution of government price policies.
6. The right to redress, which is the right to be compensated for misrepresentation, shoddy goods or unsatisfactory services.
7. The right to consumer education, which is the right to acquire the knowledge and skills necessary to be an informed customer.
8. The right to a healthy environment, which is the right to live and work in an environment that is neither threatening nor dangerous and, permits a life of dignity and well-being.
Authentic CHANEL 2.55 Double Flap Chain
Shoulder Bag - Complete Set - SOLD
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Item# Authentic-CHANEL-255-Double-Flap-
Chain-Shoulder-Bag--Complete-256
PhP61,888.88
This item is SOLD!
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Product Description
Guaranteed Authentic CHANEL 2.55 Double
Flap Chain Shoulder Bag - Complete Set
Shows minimal signs of usage. Lambskin leather
in good condition. Interior is clean. Comes with a
box, dustbag and hologram sticker serial with
matching Authenticity/Guarantee Card.
Size: W25 H15 x D6 cm Strap:L23 cm
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