MARKET STRUCTURES

What Are Market Structures?

Business entities comprise also an economy. In the economy, firms differ

from one another on how to allocate their resources to produce the products and
how to deliver them to the consumers. They have to plan how to meet the
demands of the consumers and participate in the market.
From the statements of the founder of Apple, would you agree that the
secret for being successful in the industry is to build the best thing (innovate the
product) and not more on the market structuring? As a customer and
entrepreneur, do you agree that market structures are important considerations
to be competitive in the market? You can at least answer these questions when
you appreciate more the concepts of the market and its structures.
When a firm enters the market world, it has to decide for the ideal market
structure in order stay longer in the industry. Take note that, to assess the
business environments, is a big help to remain competitive in the market. Let’s
get to know about the different market structures. In the article of AU Online
(2017), A Guide to Types of Market Structures, it defined market structure as a
starting point for assessing economic environments of firms. It also mentioned
market structure as a tool of understanding of how companies and markets work
allows business professionals and leaders to accurately judge industry and
market news, policy changes and legislation and how the economy shapes
important decisions. https://online.aurora.edu/types-of-market-structures

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The Market Structures and Characteristics

Let us proceed analyzing the market

structures. Each market structure has
characteristics which determine the relations
between the sellers to another, of sellers to
buyers, company to investors, economists to
government and more which affect the
behavior and interaction of buyers and
sellers. Remember that market is a set of
buyers and sellers who determine the price of
goods and services. source: www.vector.com

Some of the market structure’s characteristics include: type of the

products produced, number and size of sellers and buyers, price of products sold
in the market, the ease or difficulty of entering and exiting the industry and the
number of companies in the market (source: AU Online 2017).

Pure (Perfect) Competition

• Many and small sellers and no

one can affect the market
• Homogeneous product is
offered by the companies
• Free entry to and exit from the
industry
• All firms only have the motive of
profit maximization
• No concept
of consumer preference
• Consumers can dictate the price www.dreamstime.com
• Examples: agricultural markets such as wheat, cereals foreign exchange
markets, etc.

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Monopoly
* A single seller and no competitors
in the market Limited stocks
*Very unique and highly predictable
product or no close substitutes
* The firm is the price maker and the
firm has considerable control over
the price
*It can control the quantity supplied
* Entry/exit is difficult and blocked
* Sole seller has the full power to set
prices
*Examples are public
transportations like MRT, computer
software manufacturer like Microsoft www.ayokay.com

Monopolistic Competition
• Multiple giant firms produce similar
and highly predictable products
• Profit maximization occurs
• where MC=MR
• Firms compete for economic profits
• A competitive market that has only a
handful of buyers and sellers
• Sellers offer close substitutes
products to consumers
• Comparatively easier entry and exit
• Examples: cosmetics, garments,
medicines, shoes, car washes, automotive services, etc.
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Oligopoly
• Few large firms in the industry
• Standardized or differentiated
products/goods
• Various barriers to enter the market,
entry is difficult and huge capital
investment may be the barrier to enter
• The firms set and control their prices
• Examples: aluminum and steel, oil and
gas, automobile, airlines,
entertainment, hotel and restaurants,
coffee shops, etc.