1. Market structures
microeconomics

2. What is a market structure?
Market Structures are economic models describing the nature of competition among firms in an industry.
Perfect (pure) Competition
Monopolistic Competition
Oligopoly
Monopoly
Economists consider the following factors when analyzing the markets in which firms compete.
Number of sellers in the market
Conditions restricting new firms from entering the market (barriers to entry)
Amount of control individual firms have over the price of their product
The likelihood of individual firms allocating funds to the marketing of their product

3. Market structures Monopoly Oligopoly Monopolistic Competition
Least
Competitive
Most
Competitive
Monopoly
Oligopoly
Monopolistic Competition
Perfect Competition
Examples:
Utilities- Water & Electricity
Automobiles
Telecommunications
Breakfast Cereals
Airlines
Restaurants
Hotels
Hair Salons
Agriculture

4. Perfect (pure) competition
Market characterized by a large number (millions) of firms
Businesses sell IDENTICAL products
Oil
Agricultural Products
No control over price – has to rely on the market price
Easy entry into the industry
Competition based on price

5. Monopolistic competition
Market structure characterized by a large number of buyers and sellers.
Restaurants
Retail clothing stores
Products are similar to one another – differentiated
Some control over price
Relatively easy to enter the industry
Lots of non-price competition
Advertising
Promotions

6. oligopoly
Market structure characterized by only a few sellers who dominate the market
Breakfast cereals
Natural gas
Differentiated products – depends on the industry
Limited control over price
Hard to enter the industry – significant barriers
Lots of non-price competition
Advertising
Price Wars – Ex: airlines cutting ticket prices

7. monopoly
Market structure characterized by ONE seller of a product dominating the market
Electrical power companies
Cable companies
Differentiated products – unique only to that firm
Total control over price
Very difficult/almost impossible to enter the market
Some non-price competition

8. Market Characteristics
Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly
Number of Firms
Similar or Differentiated Products Sold by the Business
Level of Control Over Price
Easy to Enter Industry or are there Barriers to Entry
Existence of Non-Price Competition?
Millions of firms
Many firms
Few firms
One firm
Identical Products
Differentiated
Depends on industry
Unique product
Limited
All/significant control
No Control
Some Control
Very easy to start
Relatively easy to start
Significant barriers to entry
Almost impossible
None
Yes (advertising)
Yes (advertising)
Some