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Market Structure
Market Structure
 

Market Structure

Market Structure
 
Market Structure  Market structure – identifies how a market is made up in terms of:
 

Market structure identifies how a market is made up in terms of:

  • The number of firms in the industry

  • The nature of the product produced

  • The degree of monopoly power each firm has

  • The degree to which the firm can influence price

  • Profit levels

  • Firms’ behavior pricing strategies, non-price competition, output levels

  • The extent of barriers to entry

  • The impact on efficiency

 

Market Structure

Market Structure More competitive (fewer imperfections) Monopoly Perfect Pure
More competitive (fewer imperfections) Monopoly Perfect Pure
More competitive (fewer imperfections) Monopoly Perfect Pure

More competitive (fewer imperfections)

Monopoly

Perfect

Pure

Market Structure More competitive (fewer imperfections) Monopoly Perfect Pure

Competition

Market Structure Less competitive (greater degree of imperfection) Perfect Competition Pure Monopoly

Market Structure

Less competitive (greater degree of imperfection)

Perfect

Competition

Pure

Monopoly

Market Structure Less competitive (greater degree of imperfection) Perfect Competition Pure Monopoly
Market Structure Less competitive (greater degree of imperfection) Perfect Competition Pure Monopoly
 

Monopolistic Competition

Oligopoly

 

Monopoly

Monopolistic Competition Oligopoly Monopoly Market Structure Perfect Competition Pure Monopoly The further right on the scale,

Market Structure

Perfect

Competition

Pure

Monopoly

The further right on the scale, the greater the degree of monopoly power exercised by the firm.

Monopolistic Competition Oligopoly Monopoly Market Structure Perfect Competition Pure Monopoly The further right on the scale,

Market Structure

Market Structure  Importance:  Degree of competition affects the consumer – will it benefit the
 
  • Importance:

  • Degree of competition affects the consumer will it benefit the consumer or not?

  • Impacts on the performance

and behavior of the company/companies involved

 

Market Structure

Market Structure  Characteristics of each model:  Number and size of firms that make up

Characteristics of each model:

  • Number and size of firms that make up the industry

  • Control over price or output

  • Freedom of entry and exit from the industry

  • Nature of the product degree of similarity of the products in the industry (extent to which products can be regarded as substitutes for each other)

 

Market Structure

Market Structure Characteristics: Look at these everyday products – what type of market structure are the
 

Characteristics: Look at these everyday products what type of market structure are the producers of these products operating in?

Electric Guitar – Jazz Vodka Body Mercedes CLK Coupe Canon SLR Camera Bananas
Electric
Guitar –
Jazz Vodka Body
Mercedes CLK Coupe
Canon
SLR Camera
Bananas

Remember to

think about the nature of the product, entry and exit, behavior of the firms, number and size of the firms in the

industry.

You might even have to ask what the industry is??

 

Perfect Competition

Perfect Competition  One extreme of the market  Characteristics:  Large number of firms 
  • One extreme of the market

  • Characteristics:

    • Large number of firms

    • Products are identical express a preference for any firm

    • Freedom of entry and exit into

    • Firms are price takers have no over the price they charge for their product

    • Each producer supplies a very

    • Consumers and producers have market

 One extreme of the market  Characteristics:  Large number of firms  Products are

structure spectrum

consumer has no reason to

and out of the industry

control

small proportion of total industry output

perfect knowledge about the

 
Monopolistic or Imperfect Competition  Characteristics:  Large number of firms in the industry  May
Monopolistic or Imperfect Competition
Characteristics:
Large number of firms in
the industry
May have some element of
control over price due to the
fact that they are able to
differentiate their product
in some way from their
rivals – products are
therefore close, but not
perfect, substitutes
Entry and exit from the
industry is relatively easy –
few barriers to entry and
exit
Consumer and producer
knowledge imperfect

Oligopoly

Oligopoly  Competition between the few  May be a large number of firms in the
 
  • Competition between the few

  • May be a large number of firms in the industry but the industry is dominated by a small number of very large producers

  • Concentration Ratio the proportion of total market sales (share) held by the top 3,4,5, etc firms:

  • A 4 firm concentration ratio of 75% means the top 4 firms account for 75% of all the sales in the industry

 
Oligopoly  Music sales – The music industry has a 5-firm concentration ratio of 75%. Independents
Oligopoly
Music sales –
The music industry has a
5-firm concentration ratio
of 75%. Independents
make up 25% of the
market but there could be
many thousands of firms
that make up this
‘independents’ group. An
oligopolistic market
structure therefore may
have many firms in the
industry but it is
dominated by a few large
sellers.
Market Share of the Music Industry 2010 IFPI: http://www.ifpi.org/site-content/press/20030909.html
 

Oligopoly

Oligopoly  Features of an oligopolistic market structure:  Price may be relatively stable across the
 

Features of an oligopolistic market structure:

  • Price may be relatively stable across the industry

  • Potential for collusion or conspiracy

  • Behavior of firms affected by what they believe their rivals might do interdependence of firms

  • Goods could be identical or highly differentiated

  • Branding and brand loyalty may be a potent source of competitive advantage

  • Non-price competition may be prevalent

  • Game theory can be used to explain some behavior

  • High barriers to entry

 
Monopoly  Pure monopoly – where only one producer exists in the industry  In reality,
Monopoly
Pure monopoly – where
only
one producer exists in the
industry
In reality, rarely exists –
usually
some form of substitute
available!
Firms may be investigated
for examples of monopoly
power when market share
exceeds 25%
Use term ‘monopoly power’
with care!
 

Monopoly

Monopoly  Monopoly power – refers to cases where firms influence the market in some way
 

Monopoly power refers to cases where firms influence the market in some way through their behavior determined by the degree of concentration in the industry

  • Influencing prices

  • Influencing output

  • Erecting barriers to entry

  • Pricing strategies to prevent or stifle competition

  • May not pursue profit maximization encourages unwanted entrants to the market

  • Sometimes seen as a cause of market failure

 
 

Monopoly

Monopoly  Origins of monopoly:  Through growth of the firm  Through uniting, merger or
 

Origins of monopoly:

  • Through growth of the firm

  • Through uniting, merger or takeover

  • Through acquiring patent or license

 
 

Monopoly

Monopoly  Summary of characteristics of firms Innovation - could be high because exercising monopoly of
 

Summary of

characteristics of firms

Innovation - could be high because

exercising monopoly

of the promise of high profits,

power:

Possibly encourages high

  • Price could be deemed too high, may be set to destroy competition (destroyer or predatory pricing), price discrimination possible.

investment in research and development (R&D) Collusion possible to maintain monopoly power of key firms

  • Efficiency could be

in industry

inefficient due to lack of competition (X-

inefficiency) or…

High levels of branding, advertising

could be higher due to

availability of high profits

and non-price competition

 
 
 

TYPE OF

Product

No. of

No. of

Barriers

Relative influence

 

MARKET

sellers

MARKET sellers buyers to entry

buyers

to entry

 

STRUCTURE

       

of exit

over r the price of the product

 

from the

   

industry

Pure

Homogenous

Many

Many

None

Little or no influence;

Competition

price takers

Monopoly

Unique

One

Many

Very high

Absolute influence; seller is price maker

Monopolistic

Slightly

Many

Many

Low

Strong influence; but

Competition

differentiated

usually a price taker

Oligopoly

Slightly

Few

Many

Very high

Very strong influence;

differentiated

usually a price maker with the others

Monopsony

Usually

Few

One

Very high

Absolute influence;

unique

buyer is price maker

Oligopsony

Slightly

Few to many

Few

Very high

Very strong influence-

differentiated

buyer; usually a price maker with the others

 
 
end
end
RA 7394 :The Consumer’s Act of the Philippines is the policy of the state to protect
RA 7394 :The Consumer’s Act of the Philippines is the policy of the
state to protect the interest of the consumer, promote his general welfare
and to establish standards of conduct for business industry.
1. The right to basic needs,
which guarantee survival,
adequate food, clothing,
shelter, health care.
Education and sanitation
to health and life.
 2. The right to safety, which is the right to be protected against the marketing
2. The right to
safety, which is
the right to be
protected
against the
marketing of
goods or the
provision of
services that are
hazardous to
health and life.
 3. The right to information, which is the right to be protected against dishonest misleading
3. The right to
information, which is the
right to be protected
against dishonest
misleading advertising or
labelling and the right to
be given the facts and
information needed to
make an informed choice.
 
 
 
 4. The right to choose, which is the right to choose products at competitive prices
4. The right to choose,
which is the right to
choose products at
competitive prices with an
assurance of satisfactory
quality
 5. The right to representation, which is the right to express consumer’s interests in making
5. The right to
representation, which is
the right to express
consumer’s interests in
making and execution of
government price
policies.
6. The right to redress,
which is the right to be
compensated for
misrepresentation,
shoddy goods or
unsatisfactory services.
 7. The right to consumer education, which is the right to acquire the knowledge and
7. The right to consumer
education, which is the
right to acquire the
knowledge and skills
necessary to be an
informed customer.
 8. The right to a healthy environment, which is the right to live and work
8. The right to a healthy
environment, which is the
right to live and work in
an environment that is
neither threatening nor
dangerous and, permits a
life of dignity and well-
being.
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Authentic CHANEL 2.55 Double Flap Chain
Shoulder Bag - Complete Set - SOLD
Top of Form
Item# Authentic-CHANEL-255-Double-Flap-
Chain-Shoulder-Bag--Complete-256
PhP61,888.88
This item is SOLD!
Bottom of Form
Product Description
Guaranteed Authentic CHANEL 2.55 Double
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Shows minimal signs of usage. Lambskin leather
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 STORE POLICY: All sales are final. All payments must be Cash on delivery or bank
STORE POLICY:
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