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CLUE: INTERNATIONAL
PROVIDER
OF ELECTRICITY
Entergy Corporation is an integrated
energy company that delivers
electricity to 3 million utility
customers.
"Firm competition and
market structure"
chapter 7
"firm competition"
An approach that assumes all firms can anticipate the
prices that their competitors will charge and that each firm
can decide what production level and price leads to the
highest profit it can achieve; also called price competition.

"market structure"
The nature and degree of competition among firms
operating in the same industry.
Markets are classified according to certain structural
characteristics.
Pure competition, monopolistic competition, oligopoly, and
monopoly.
4 types of competition
PERFECT COMPETITION
Pure Competition
IMPERFECT COMPETITION
Monopolistic Competiton
Oligopoly
Monopoly
Perfect competition:

pure competition
Generally defined by many competing firms
that sell similar products.
Example: agricultural products, such as
corn, wheat, and soybeans.
A large number of sellers and buyers exist.
Buyers and Sellers deal in identical products.
Each buyers and sellers act independently.
- Competition keeps price low
imperfect competiton:

monopolistic competition
CHARACTERISTICS:
When many companies offer competing products or services
that are similar, but not perfect, substitutes.

Monopolistic competition exists between a monopoly and

perfect competition, combines elements of each, and includes
companies with similar, but not identical, product offerings.

Restaurants, hair salons, household items, and clothing are

examples of industries with monopolistic competition. Items
like dish soap or hamburgers are sold, marketed, and priced by
many competing companies.
Product differentiation
- The products are similar but not identical.
Difference can be real or perceived
- Real Differences - example, athletic shoes
- Perceived Difference - example, aspirin

NON-PRICE COMPETITION:
Advertisement try to convience consumers that the product is
somehow better than the other hand.

If the company can convienced consumers that they have a better

product, they may be able to increased price but not too much.

PROFIT MAXIMATION:
There is still a price competition so the company cannot raise their
price too high.
oligopoly CHARACTERISTICS:
Sometimes they are engage in price wars, which
can be very damaging to the company, but great
for customers.

Market structure in which very few large sellers of a

product dominate.

Due to few numbers of firms, one firm can cause a

change in output, sales ang price in the industry as
a whole.

Example: film and television production, recorded

music, wireless carriers, and airlines.
PRICING BEHAVIOR:
Since they typically follow each other one firm can
lower the price and expect the other follows.

This can lead to a price war, prices could go lower than

the cost of producing the product (loses).

This firms will typically use non-price competition to

attract customers
They uses advertisement campaigns, change the
product in some way to make it "better".

One firm hoping to that the other firms raise their price
if they do, but there is no guarantee and you could loss
business.
monopoly
CHARACTERISTICS:
Only one seller of a particular product. One seller
dominates the market for a product with at least 75%
control. Many regulations are limit them, or they are
illegal.

A market structure characterized by a single seller,

selling a unique product in the market. In a monopoly
market, the seller faces no competition, as he is the
sole seller of goods with no close substitute.
A monopoly is an enterprise that is the only seller of a good or service.
Example: Meralco, Microsoft and Windows, PLDT, Maynilad, GMA, and etc.
types of monopoly:

natural monopoly
Exists as a result of the high startup costs for
infrastructure or materials. They appear in industries that
require unique raw materials, technology or equipment.
The market cant handle competition in this product and it
is inefficient to have failure.

The nature of the industry dictates that society would be

better served by only one supplier.
Telephones, gas, electric, public transportation

To set up telephone lines for multiple carriers, pipes for

multiple gas companies, electricity for multiple suppliers
would be chaos and not economically viable.
Geographic monopoly
A monopoly exists because no other business in the
immediate area offers any competition.
Gas Station in middle of nowhere

A condition that exists in a local area or region where one

company is the sole provider of a good or service in an
isolated area.
Technological monopoly
Occurs when one company controls
manufacturing methods or has rights/patents to
exclusively produce it.

A firm or individual has discovered a new

manufacturing technique or has invented or
created something entirely new.
I-Phone
Hybrid Car

If you get a patent on a product, no one else can

legally produce it.
government monopoly
A government agency is the sole provider of a
particular good or service and competition is sometimes
prohibited by law.

A business the government owns and operates.

A situation in which the government owns and controls

a particular industry and there is no competition.
reference:
https://www.investopedia.com/terms/m/monopolisticmarket.asp#:~:text=I
nvestopedia%20%2F%20Joules%20Garcia-,What%20Is%20Monopolisti
c%20Competition%3F,not%20directly%20affect%20its%20competitors.
https://saylordotorg.github.io/text_principles-of-managerial-
economics/s07-firm-competition-and-market-
st.html#:~:text=An%20approach%20that%20assumes%20all,achieve%3
B%20also%20called%20price%20competition.
https://www.acpsd.net/cms/lib/SC02209457/Centricity/Domain/5921/Mar
ket%20Structure.ppt
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