MARKET STRUCTURES The structural condition of a market has an enormous influence on supply, demand, pricing, efficiency, fairness and resource allocation. Structures are defined by the degree of competition they allow. 1) Monopoly is a market structure in which there is only one producer/seller for a product. Therefore, monopolies are price makers.  2) Oligopoly is a market structure where only a few firms make up an industry. These firms have control over the product's price.  3) Monopolistic  Competition is a market structure with many sellers; it occurs often in the real world.  

Characteristics of a Monopoly  - Entry into such a market is restricted due to high costs or other impediments, which may be economic, social or political. ​  - Government can create a monopoly over an industry that it wants to 
​control, such as electricity. ​  - One entity has the exclusive rights to a natural resource. For example, 
​in Saudi Arabia the government has sole control over the oil industry. ​  - A company has a copyright or patent that prevents others from entering the market. Pfizer, for instance, had a patent on Viagra. ​

- The product in a monopoly must be unique.​  - If substitute products were available, the monopolist would not 
​be able to exert control over the product's price (the essential point of 
​creating a monopoly).​ ​  - Because these circumstances are rare, monopoly is not a common market structure. Because it is the least competitive market, it is not a desirable structure for consumers or governments.​

TYPES OF MONOPOLIES All monopolies fall into 4 broad categories: A) Natural - It is financially impractical, if not impossible, for multiple companies to engage in the business. For example, if you had multiple companies attempting to offer electricity, that would require multiple power lines running to homes which is impractical and probably spatially impossible. B) Geographic - Only one company offers a particular good or service in an area. For example, in a small town there may only one general store, which has a monopoly on the goods it sells. C) Technological - A good or service a company provides has legal protection in the form of a patent or copyright. D) Government - Government sometimes reserve a specific trade, product or service for public agencies. For example, many times a government agency will be in charge of water. Legal barriers are put up to prevent other companies from competing in those areas.

Characteristics of Oligopoly  - There are high barriers to entry. Often, oligopolies are found in markets where the initial capital outlay is very high, discouraging new firms from competing - example: automobile manufacturing. This is a common market structure in heavy industry.  - Pricing is interdependent so price competition is rare. If two firms control roughly fifty percent of the market share each, when one firm lowers its price it will gain a short term market share advantage which will be immediately offset as its competitor follows suit (as it must). Thus both firms will end up with the same sales at a lower price, making price competition impractical. Collusion and price fixing, or price leadership by the leading firm in the industry is common.  

Characteristics of Oligopoly cont'd  The products in the market are differentiated.  Advertising is used for both product competition (highlighting physical differences in the products) and image competition (highlighting the status value or other ephemeral qualities of the product), but not for price competition.  

Characteristics of Monopolistic Competition  - Differentiated Products characterize this market.  For example, two different brands of soda have different tastes and flavors but are still sodas. These differences allow producers to emphasize the strongest qualities of their product and develop brand loyalty among the consumers. Consumers are often willing to pay a little more for their brand, but since there are a large number of firms supplying the products, and because the differences are not extreme, the level of price control exercised is minimal.  

- Advertising is a key component in creating brand loyalty.  Product and Image Competition are very important, but Price Competition is the major factor influencing sales.​ ​  - There are few entry barriers and firms enter and leave the market frequently.​

Mad Men – The Carousel

TV Commercials and Advertising Answer these three questions for each commercial while viewing them in class. To be collected. 1. Who is the target audience? 2. What techniques are being used? 3. Why is this commercial effective? Links Miller Light 1 Miller Time 70s Commercial Spuds Frogs Wasssup Univision

3) Perfect or Pure Competition is a rare market structure in the real world, but it represents the ideal model for market behavior and the benefits of a market economy in general.  - There are many buyers and sellers, creating an ultra competitive atmosphere based on price competition that maximizes the efficient use of resources and responsiveness to consumer demands.  - The products are identical and so there are many substitutes. There is no way to compete via product or image differences so price competition is the sole means of increasing sales.  - There no barriers to entry for new companies, so producers in a perfectly competitive market do not have any leverage over price. For example, in a perfectly competitive market, should a single firm decide to increase its selling price of a good, the consumers can just turn to the nearest competitor for a better price, causing any firm that increases its prices to lose market share and profits.