Introduction to Markets

Bonnie Nguyen & Andrew Wait

2016 Bonnie Nguyen and Andrew Wait 1

Different market structures
We now will look at four different types of markets in turn:
Perfectly competitive markets
o These markets have many buyers and sellers, low barriers to entry and an identical product.
o Consequently, firms do not have the market power to set prices.
Monopoly markets
o A market with one seller and high barriers to entry and the power to choose its price.
Monopolistically-competitive markets
o There are many firms selling slightly differentiated products.
o These sellers have scope to set their own prices, but there are low barriers to entry into these
markets.
Oligopoly markets
o These markets are characterized by only having a few firms.
o Consequently, the strategic interaction between these firms is critical to the outcome in
these markets. dictated by the actions of other firms in the market.

2016 Bonnie Nguyen and Andrew Wait 2