1. Economics
Market Structures

2. Four broad categories of market types
Perfect competition
„ Monopoly
„ Monopolistic competition
„ Oligopoly

3. Terminology to know
market structure is the number of firms producing identical products which are similar/homogeneous
Barriers to entry is the  are obstacles that make it difficult to enter that  market
Product Differentiation is the is the process of distinguishing a product or service from others, to make it more attractive to a particular target market

4. Perfect competition - definition
A market condition in which individual buyers and sellers have no power to affect the market price of a good or service. There are many buyers and sellers, and prices reflect supply and demand.

5. Perfect competition Many sellers „ Homogeneous product
„ Easy entry and exit
„ Perfect information about prices

6. Monopoly - definition
A situation in which a single company or group owns all or nearly all of the market for a given type of product or service

7. Monopoly One producer „ Considerable power over price „ Unique product
„ Very high barriers to entry

8. Oligopoly - definition
a state of limited competition, in which a market is shared by a small number of producers or sellers.

9. Oligopoly - characteristics
Only a few large sellers/firms
many small niche firms
examples: soft drinks, cereal, beer, oil, infant formula, automobile industry and airlines),
Interdependence on pricing – when one changes their price the rest normally must too
difficult market entry because the main companies are so large and control the market
Must differentiated similar type products (computers, detergent, cars) when possible.
National advertising – huge marketing budgets

10. Monopolistic Competition - definition
A type of competition where many producers sell products that are somehow differentiated from one another (e.g. by branding or quality) and therefore are not perfect substitutes

11. Monopolistic Competition
„ Many firms
„ Differentiated products– products are close substitutes to each other
„ Firms do not react very fast to each other’s actions (because there are so many)
„ Easy entry and exit „ Examples: pizza, candy, restaurants, …
Marketing is important: firms want to make their product unique

12. Characteristics of Market Types
Market Structure
Example
Number of producers in the industry
Types of products
Power of firm over pricing
Ease to enter the industry (barriers)
Strategies for non-pricing competition
Perfect Competition
Agricultural products
Many – Unlimited
Standardized – almost identical
None
Easy – very few barriers
Monopolistic Competition
Pizza shops, retail trade, fast food
Many
Differentiation
Some
Easy- very few barriers
Advertising and differentiation of product and service
Oligopoly
Auto Manufacturers, Breakfast Cereal, Computers
Very Few
Could be standardized or differentiated
Hard – a large number of barriers
Monopoly (legal)
Public Utilities
One
Unique product
Considerable
Almost impossible – tons of barriers
advertising

13. Small Business a small business is one that is
independently owned and operated
is organized for profit
is not dominant in its field.
is determined based on the average number of employees for the preceding twelve months (normally 500 or less in all locations combined) or on sales volume averaged over a three-year period.