Market Structures of Competition

Market Structures What is the primary aim/goal of businesses? –To maximize profits –This goal can motivate companies to eliminate competition, increase prices and lower quality of products. What is competition? –Striving against others to reach an objective –The government attempts to maintain competition in the market to insure low prices and high quality of products

4 Types of Market Structure 1.Pure/Perfect Competition –Large number of buyers and sellers –Identical product –Well informed buyers and sellers More CompetitionLess Competition

Pure/Perfect Competition Many buyer/sellers Well informed Identical Products Prices kept low

2. Monopolistic Competition Meets all condition of perfect competition except for identical products. –Product differentiation vs. Monopolistic competitors use non-price competition –Advertising, giveaways, or other promotions More CompetitionLess Competition

Monopolistic Competition Same as pure competition except for product differentiation Gap Levis Lucky

Monopolistic Competition Are these shampoos/conditioners different? Pantene $14.50Frederic Fekkai $54

Monopolistic Competition Are these mascaras different? Maybelline Sisley $4$43

3. Oligopoly A few very large sellers dominate the industry Oligopolists act independently by lowering prices soon after the first seller announces the cut Collusion: formally agree to set prices Sometimes engage in price wars More CompetitionLess Competition

Oligopoly Anheuser-Busch Miller-Coors

Oligopoly Boeing Air-Bus

Oligopoly Few producers control supply and price

Coca-Cola Classic Coca-Cola classic Sprite Dasani Barq's Dannon Nestea Rockstar Evian Fanta Fresca Minute Maid Mr. Pibb Powerade Seagrams Ginger Ale & Mixers TAB

Pepsi-co Aquafina Pepsi Mountain Dew Sierra Mist Sobe Lipton Brisk Tea MUG Root Beer Slice Gatorade Dole Juice Tropicana

Cadbury Schweppes 7 Up Canada Dry Clamato Dr Pepper Hawaiian Punch Mott's Orangina Snapple

Toyota Scion Lexus

Chrysler Jeep Dodge

General Motors Chevrolet Buick Pontiac GMC Saturn Hummer SAAB Cadillac

4. Monopoly Only one seller of a particular product Few monopolies

Monopoly More CompetitionLess Competition One seller dominates the market for a product with at least 75% control. *defined by the Sherman Act

Some companies that have just recently lost monopoly power

Monopsony More CompetitionLess Competition Wal-Mart, in the United States, functions as a monopsony in certain market segments, as its buying power for a given item may dwarf the remaining market.

Monopoly Natural Monopoly - efficient production by a single supplier

Monopoly Geographic Monopoly – happens in small town

Monopoly Technological Monopoly - new invention/patents I-Pad Segway

Monopoly Government Monopoly - government owned businesses

Monopoly Anti-Trust Exempt Monopoly Sports Leagues have a de-facto Monopoly

The End