MARKET STRUCTURE
Market Structure refers to the size and number of Buyers and Sellers in the market for a good or service.
A market can be defined as a group of firms willing and able to sell a similar product or service to the same potential buyers.
1. PERFECT COMPETITION
FEATURES
I. Large number of Buyers and Sellers.
II. Products are perfect substitutes of each other ( HOMOGENEOUS PRODUCTS)
III. Free entry and exit of firms.
IV. Perfect knowledge about the Market.
V. No Government intervention.
2.MONOPOLY
FEATURES
i. One seller and large number of buyers.
ii. Restrictions on the entry of New Firms.
iii. Firm is Price Maker.
iv. Products have no close substitutes.
EXAMPLES OF MONOPOLY
Indian Railways has Monopoly in
Rail Transportation.
Hindustan Aeronautics Limited has monopoly over production of Aircraft.
There is Government monopoly over production of Nuclear power.
Eatables inside a Theatre during a movie.
3.MONOPOLISTIC COMPETITION
FEATURES
i. Large number of Buyers and Sellers in the market.
ii. Product Differentiation.
iii. Free entry and exit of firms.
iv. Firm is a Price maker.
v. Imperfect Knowledge.
EXAMPLES OF MONOPOLITIC COMPETITION
Lux, Godrej, Hamam, Dove,etc, among Bathing soaps…..
(Here, Products are close, but not Perfect Substitute of each other)
4.OLIGOPOLY
A market structure in which few firms dominate the supply of an industry’s output and compete
with each other for markets.
OLIGOPOLYFEATURES
i. Industry dominated by small number of large firmsii. Many firms may make up the industryiii. High barriers to entryiv. Products could be highly differentiated – branding
or homogenous.v. High degree of interdependence between firms.vi. Collusion.
BASIS PERFECT COMPETITION
MONOPOLY MONOPOLISTIC COMPETITON
OLIGOPOLY
No.ofbuyers and sellers.
Large One seller,LargeBuyers
Large Few sellers,LargeBuyers
Product Homogeneous Homogeneous& Differentiated
Product Differentiation
Homogeneous& Differentiated
Price Uniform Not Uniform Not Uniform Not Uniform
Entry of Firms
Free Entry Not possible Not absolute Freedom
High Barriers
Knowledge of Market conditions
Perfect Knowledge Imperfect Knowledge
Imperfect Knowledge
Imperfect Knowledge
SellingCosts
Not Required Not Required Very significant Very Significant