Different market Structures
Perfect Competition:
 Demand is perfectly elastic.
 Supply and Demand determine Price.
 Suppliers are Price takers.
 Many Producers
 Identical products
 Easy Entry
 No control over Prices
Monopolistic Competition:
 Imperfect Competition
 Producers have some control over price
 Producers have market power
 Many Producers
 Differentiated products
 Few Barriers Entry
 Some control over Prices
Oligopoly:
 Imperfect Competition
 Producers have some control over price
 Producers have market power
 Few Producers
 Similar products
 High Barriers of Entry
 Some control over Prices
Example:
Some stock and commodities (commodity – exactly
the same, no matter who makes it)
Auctions
Fish and fruits vendors selling at the same market
Commercial fishing and wood pulp and paper
industry
Example:
Most common form and extremely common in
service industry
- A lot of non-price competition- physical/style,
service, location, status symbol
Shoes, clothing, gas, restaurants
Called Monopolistic because brands seem to be
unique- brand loyalty
Company “monopolizes” its brand
Example:
Arise due to economies of scale rule of thumb (4
top producers supply 60% of outputs)
Bigger producers take advantage of smaller
Soda (Coke, Pepsi, Cadbury Schweppes)
Airlines (Boeing and Airbus)
Automobiles
Monopoly:
 Imperfect Competition
 Producers have some control over price
 Producers have market power
 Price Setters
 One Producer
 Unique products
 High Barriers of Entry
 Substantial control over Prices
Example:
The Firm is the Industry, Famous – Standard Oil,
Microsoft, Major League Baseball
There Anti-Trust laws but there are also Legal
Monopolies.
Resource monopolies- controlling one resources
Government created monopolies (copyrights and
patents, public franchise, Licenses)
Natural Monopolies- when a firm can supply a good
or service more efficiently and at a lower cost- gas,
water, electricity, and cable TV- they can take
advantage of economies of scale.