MARKET SRUCTURE

[Document subtitle]

SHIKSHA SINGH
17BLA1051
DEFINITION:

Market structure is best defined as the organisational and other

characteristics of a market. We focus on those characteristics
which affect the nature of competition and pricing.

The most important features of market structure are:

1. The number of firms 

2. The market share of the largest firms (measured by
the concentration ratio)
3. The nature of costs (including the potential for firms to
exploit economies of scale)
4. The degree to which the industry is vertically
integrated - vertical integration explains the process by
which different stages in production and distribution of a
product are under the ownership and control of a single
enterprise. A good example of vertical integration is the oil
industry, where the major oil companies own the rights to
extract from oilfields, they run a fleet of tankers, operate
refineries and have control of sales at their own filling
stations.
5. The extent of product differentiation (which affects
cross-price elasticity of demand)
6. The structure of buyers in the industry (including the
possibility of monopsony power)
7. The turnover of customers (sometimes known as
"market churn") – i.e. how many customers are prepared
to switch their supplier over a given time period when
market conditions change. The rate of customer churn is
affected by the degree of consumer or brand loyalty and
the influence of persuasive advertising and marketing
Types of market:
Monopolistic is a type of imperfect competition such
that many producers sell products or services that are
differentiated from one another (e.g. by branding or
quality) and hence are not perfect substitutes. In
monopolistic competition, a firm takes the prices
charged by its rivals as given and ignores the impact of
its own prices on the prices of other. This market
structure exists when there are multiple sellers who are
attempting to seem different than each other.
2. Oligopoly, in which a market is run by a small number
of firms that together control the majority of the market
share.
 Duopoly a special case of an oligopoly with two
firms.
 Monopsony, when there is only a single buyer in a
market.
 Oligopsony, a market where many sellers can be
present but meet only a few buyers.
3. Monopoly, where there is only one provider of a
product or service.

 Natural monopoly, a monopoly in which economies

of scale cause efficiency to increase continuously with
the size of the firm. A firm is a natural monopoly if it
is able to serve the entire market demand at a lower
cost than any combination of two or more smaller,
more specialized firms.
4. Perfect competition, a theoretical market structure
that features low barriers to entry, identical products
with no differentiation, an unlimited number of
producers and consumers, and a perfectly
elastic demand curve.
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