A COMPARISON OF FOUR MARKET STRUCTURES BASED UPON THE DEGREE OF COMPETITION PERFECT COMPETITION MONOPOLY OLIGOPOLY MONOPOLISTIC COMPETITION

OLIGOPOLY

NUMBER OF FIRMS A FEW LARGE FIRMS (AT LEAST TWO) FOUR FIRM CONCENTRATION RATIO If the combination of market share of the four largest firms in an industry is equal to or greater than 40%, the industry is considered an oligopoly.

CONTROL OVER PRICE A FAIR AMOUNT OF CONTROL There are four major theories about oligopoly pricing: (1) Oligopoly firms collaborate to charge the monopoly price and get monopoly profits (price leader). (2) Oligopoly firms compete on price so that price and profits will be the same as a competitive industry. (3) Oligopoly prices and profits will be between the monopoly and competitive ends of the scale. (4) Oligopoly prices and profits are "indeterminate" because of the difficulties in modeling interdependent price and output decisions.

PRODUCT DIFFERENCES Type of Product Identical, homogenous, standardized Slightly differentiated

BARRIERS TO ENTRY Substantial Significant barriers Entry barriers exist that allow a handful of firms to achieve economies of scale, but no more beyond that. Any new firms would have too small a market share and would have to produce at too high a price. Sometimes the cost of capital is too high and other times, ownership and control of the raw materials is a factor. Patents and brand loyalty are also barriers of entry into an oligopolistic market.

FORMS OF COMPETITION Non-price competition (advertising) Extensive for differentiated products Student presents an advertisement sample 1966 Mustang Should a single girl buy a '66 Mustang? That's the burning question posed here. Success and marriage are right around the corner if you do, at least according to the fine folks at Ford. The Ford Mustang introduced a new era in car making and merchandising - an affordable, sporty, small (by 60's standards), well- designed automobile marketed primarily to women. Enough men bought the Mustang that Ford repositioned it as a muscle-car a few years later Mustang

EXAMPLES Automobile industry Tobacco industry Breakfast cereal industry

Works Cited (Yellow Do Not Enter) Do_Not_Enter_sign.svg.png (Red Do Not Enter) Do_Not_Enter_sign.svg.png Not-Enter-Posters.jpg (Skull Do Not Enter) Not-Enter-Posters.jpg (Kelloggs) (Quaker) (General Mills) (Google) (Yahoo) (Microsoft) (Ford) (General Motors) (Chrysler) (Oligopoly) (1966 Ford Mustang Commercial)