MARKET STRUCTURES IN SRI LANKA

MONOPOLISTIC COMPETITION.CONTENT 1) 2) 3) 4) PERFECT COMPETITION. MONOPOLY. OLIGOPOLY .

1) Perfect Competition 2) Monopoly 3) Monopolistic Competition 4) Oligopoly .MARKET STRUCTUER IN SRI LANKA In Sri Lanka there can be found 4 types of market structures and all the business firms in Sri Lanka can be included into this 4 market structures.

The buyers always think there is no any kinds of different among these products when producer is different. E. Although hoe . Because of one firm can’t influence the current market price and units. Therefore no need to sell their products in bellow market price in further. Since this kind of firm is considered as a price taker. There for changing behavior of any firms or any buyers’ can’t affect the market. It shows one buyers or sellers behavior is not affected to the market. Any buyer can’t change the demand and supply of the market.Perfect Competition There are four major conditions to be completed to from a Perfect Competition Market. Finish goods of every firm can sell the present market price. The present value of the market can’t affect the one firm to exist price of the market. 1) Homogeneous Products All the firms in the industry produce completely substitutes and completely homogeneous products. White Eggs Kerosene 2) There should be high amount of buyers and sellers There should be high amount of buyers and sellers.g.

many units are produced by that particular firms which have to be sold on that existing price and in the market since firms demand curve is perfectly elastic. Other firms cannot keep someone from entering the industry. Every industry firm in the market take decisions with observing specially market supply and demand as well as prices. profitability production cost and technology. Paddy Cultivation Corn flour Pumpkin Lime . If this information cannot be obtain accurately there can be see some difference among market price. Any person can enterer exit from the market moving the resources. 4) There should be high amount of information available for both buyers and sellers. Laws do not require producers to obtain licenses or pay for the privilege of producing.80/= 3) There shouldn’t be barriers to enter or exit from the market.g.   Another important point of this perfect competition is free entry and exit. Therefore entry and exit of the industry is not difficult. Price of 1kg of is Rs. E. E.g. can be acquire without any cost. For the market firms do not require large type of capital investments. There should be high amount of information available for both buyers and sellers.

Ex: Vegetables Eggs Fruits If we take vegetable industry in Sri Lanka we can see it is processing under perfect competition. According to the market structures in Sri Lanka we can find more industries under the perfect competition. Sometimes they are using their brand name to sell vegetables as well and other normal retailers also trying to . now there is a new tendency that most of super markets in Sri Lanka trying to differentiate their vegetables among other competitors.PRICE Existing Price P1 QUANTITY The Demand curve of a firm in the perfect competition market. There for one particular seller or buyer cannot influence to the whole market. The prices of vegetables always depend on the market supply and demand and other important characteristics. using the quality of the vegetables. Because the vegetables produced in Nuwaraelliya and vegetables produced in dambulla are same. Sri Lankan vegetable market’s retailers are trying to differentiate quality of vegetables according to the areas. Perfect Competition Market Structure in Sri Lanka. Specially. So we cannot separate vegetables according to the areas or producers and we can find so many buyers and sellers than the other market structures.

differentiate their vegetables according to the areas specially that they are using different areas to differentiate vegetables. But now government trying to introduce some rules on vegetables transportation and anyway government influence to the vegetables prices indirectly through Subsidies for agriculture. Due to government involvement for agriculture as above the prices of vegetables would be affected. . And further more about the vegetable industry in Sri Lanka we can say there are no any barriers or limits to enter the market.

We can’t see substitute’s products in monopoly market. Because of this situation producer becomes monopoly situation. So firm and industry is same unit. There are four major conditions can be seen in monopoly market. Therefore can’t be seen the competition can be retained the monopoly in the market.Monopoly Market When comparing perfect competition market. and it’s the industry. There is lot of barriers to enter the market. So its demand curve is the industrial demand curve. One can be only purchased producer. In this monopoly market there’s an only one producer. They can be natural or artificial. the industry demand curve is a downward sloping line because of the law of demand. So there are no other available producers who produce those particular products. In this monopoly market can’t see difference between the firm and the industry. Because of this unique characteristics of the products customer haven’t a chance to choose products or have to purchase that product from that particular producer. therefore they are the sale producer. In any market. 1) Product should be unique one. 3) There should be barriers to enter the market. Otherwise customers have to stay without that product. the monopoly market structure can be seen as radical situation. 2) There should be only one firm in the industry. .

Ceylon Leather Products Cooperation. Sri Lanka telecom. Past Monopoly Industries in Sri Lanka     Ceylon Petroleum Cooperation. Monopoly Market Structure in Sri Lanka According to the monopoly market structure in Sri Lanka we can find few examples under this structure but earlier we had so many industries under the monopoly market structure.PRICE D 0 QUANTITY Demand curve of a firm in the monopoly market In addition to that through this monopoly demand curve can be identified. especially that a firm high ability to influence determining the price in the market. . Sri Lanka Transportation Board.

we can see only one company handling the total railway industry which is Sri Lanka railway department it is a totally government organization. Actually their main focus is to provide efficient railway transportation to people who are using railway transportation not the profit since this is a government monopoly people can get more benefits than the privet sector. So from the people’s point of view railway department is always operating their operations according to the people’s needs.  Sri Lanka Water Board. We can clearly get an idea about their main focus through the price and service giving to the people. Therefore Sri Lankan railway transportation is a government’s monopoly.Present Monopoly Industries in Sri Lanka  Sri Lanka Railway Department.  Ceylon Tobacco. Railway Transportation If we take railway transportation in Sri Lanka. Unless railway department in government control people cannot expect these kinds of benefits. So we can see lot of barriers for new entrance. .

E. Price of the product 3. In this kind of market there is no supplier like perfect competition.g. producers always are trying to differentiate their product among competitors. 1) There should be big amount of sellers. Marketing . Those product differentiations are: 1. In this situation. Toothpaste. 2) There are always trying to differentiate their products. Quality of the product 2. The market structure called monopolistic competition is an industry in which many sellers produce a differentiated product and entry is easy. but there is a considerable amount of suppliers. Slippers Because of the product differentiation producer become very stronger. Therefore a firm in the industry can’t influence rest of the firms in the industry of their average price.Monopolistic Competition Monopolistic competition is firm combination with perfect competition and monopoly. We can see 4 major conditions in this monopolistic competition. although there are more firms in same industry. Soap. This can be seen as the very common market structure in the world. Share of market is not important.

PRICE D 0 QUANTITY Demand Curve of a firm in the Monopolistic The Demand Curve of a firm in the monopolistic competition is a downward sloping curve from left. . The reason is that curve firm’s ability determines the price.

Among those barriers which avoid entering the oligopoly take major place are Economies of scale. It’s not easy to new enters compete with the firms which have gained the trust of the customer and higher goodwill. In addition to that another strategic barrier is through that connections with distributers can postpone entering the competitors’ product into shelves in the market.  Economies Scales. In the Oligopoly Market there can be seen oligopoly market in many natural and artificial barriers to enter that market as monopoly. There should be 3 main conditions to be formed a oligopoly market. The Strategies behaviors are define as the policies conducted by existing firm to separate the potential competitors from the market.  Strategies Behavior. The reason is if there would be a new entrant the firms with the high capacity could easily spread the production to prevent grabbing the market of new entrance.Oligopoly Market There should be two or more but less than handful firms in a monopoly market. That company’s minimum production level is high amount relatively their optimum their situation the firms who enter newly into this oligopoly have to face difficulties to well establish in the market. goodwill and strategies behavior. . As example some of Oligopoly firms high capacity of production. Another factor for preventing the firms to enter the market is the goodwill of acquire by existing firms. They are: 1) There can be seen artificial or natural barriers when enter the new firm.  Goodwill. A firm which has economies of scales can produce huge amount under the minimum average cost.

Therefore lots of firms are trying to build up interdependently.2) There should be fewer amounts of competitions firms. Since handful amount of firms doing businesses in the market. the market share of a firm is relatively huge. Every firms always considering about their competitors activities. Therefore initial firms profit will be decreased. If a firm decides to decrease the price. Beverages. Therefore can be seen interdependent situation among those firms. When the number of firms getting less. For example. One firm’s principals directly influence to other firms. their interdependent would increase. Actually firms don’t like to take decisions alone. as a result of this demand and profits would decrease. As example. 3) Market domination. PRICE D P1 Q1 QUANTITY Demand curve of a firm in oligopoly market-( Kinked Demand Curve) . Because of that rest of the competitive firms decrease their price.Newspapers. commercial Banks. These types of market individual decisions are risky. Soaps.

other rest of the firms would not increase their prices.In oligopoly Market. Because of this situation the quantity demand of the firm’s that price increased would be than percentage of price increased. The reason is that action would not affect to rest of the firms disadvantageous. Only two firms in industry. Sanitary Products.P. if a firm increases their price above “P”. More than two firms in industry. Oligopoly Market in Sri Lanka When we are considering more about oligopoly market in Sri Lanka. Beverages. Oligopoly market can be seen as two types in Sri Lanka. 2. we can see many industries operating under the oligopoly. Gas  Petroleum . it would affect rest of the other firms. (Duopoly)  L. In this industry we can see two or more but less than handful firms and high competition among those producers. (Duopoly) 1. Since rest of the other firms also decrease their price. …. Only two firms in industry.. 1. More than two firms in industry:    Confectionary.etc: 2. When that firm decreases the price below “P”. As the result quantity demand of the firms that price decrease would increase less than percentage of price decrease.

Gas When we look at the duopoly market we can find out only two firms in L . Gas industry in Sri Lanka. And when we look at the today situation about the gas industry in Sri Lanka we can see both of these companies doing their business in friendly manner and they are always focus on the industry because people have other alternatives for gas. But recently Sri Lankan government has took the ownership of shell company. According to the Sri Lankan confectionery industry we can see producers frequently come up with new versions.They are always trying to differentiate their products specially through the advertising and quality levels. Now government is going to give some benefits to the people. 2. . Ex: C.P. 1. because during the last 10 years gas price being increased number of times and it has become a huge problem for people as well as government. Petroleum When we consider about the petroleum industry in srilanka we can see only two companies in this industry. Lucky Land. Those are Shell and Laugfs.P. Sun Rich. So from the new versions they can easily differentiate their products from the market and another important characteristic of this industry is some companies now expand to the international market and dealing with the world. L. Both of these companies are totally private companies. Duopoly Market. Edna. Maliban.L.Furthermore about this oligopoly market we can see more competitive environment than the other industries .B.

Furthermore about petroleum industry we can see more government impact on this industry mainly because Ceylon petroleum cooperation is totally under government control. But CYPETCO trying to go beyond industry limits and maximize their profit. So we cannot see high competitive environment in this industry. .They are:  Ceylon Petroleum Cooperation (CEYPETCO)  Indian Oil Company (IOC) When we consider more about their industry we can see both of these companies doing their business in friendly manner. Therefore government has put some favorable limits (from the CYPETCO point of view) on this industry like fuel station limits. because the government can earn more income.

Balasuriya. B. Srimal.M. 2.M.R. H. J. SRI LANKA.Y. NATIONAL INSTITUTE OF BUSINESS MANAGEMENT.D.N. Devage. K.M. 5. D. Prathiba. Liyanage.M. 1.W. 3.Group Members. .P.D. Suraweera.L. 4.T.C. S. ADBM-F-101087 ADBM-F-101016 ADBM-F-101059 ADBM-F-101068 ADBM-F-101088 ADBM-F-101002 ADVANCED DIPLOMA IN BUSINESS MANAGEMENT.S.A. 6.

Sign up to vote on this title
UsefulNot useful