MARKET

STRUCTURE
S
 FACTORS DETERMINING THE DEGREE OF
COMPETITION AND MARKET POWER:
➢ Number and size ➢ “Pricing power”
of buyers and ➢ Degree of
sellers knowledge of
➢ Type of products economic agents
➢ Entry and exit of regarding prices,
firms in the market costs, demand and
supply
condition
2
Factors that Determine the Competition
Level in the Marketplace

Number and size of buyers and sellers

It determines the market concentration.
Having more suppliers and sellers in the
market signifies less concentrated market;
whereas fewer producers indicates a more
concentrated market. This market
concentration also determines the market
power of the firms.
3
Factors that Determine the Competition
Level in the Marketplace

4
Factors that Determine the Competition
Level in the Marketplace
Type of Product
It refers to the ability of the company to
develop a market niche through different
methods of differentiating the goods and services
(making the product unique).
Products could be:
o Homogenous – undifferentiated or same products
o Niche – differentiated or unique products
5
Factors that Determine the Competition
Level in the Marketplace

6
Factors that Determine the Competition
Level in the Marketplace
Entry or Exit of firms in the market

This refers to the strength of barriers

that may hinder the entry of firms or
suppliers in the market.

7
Factors that Determine the Competition
Level in the Marketplace

8
Factors that Determine the Competition
Level in the Marketplace

9
Factors that Determine the Competition
Level in the Marketplace
Pricing Power
This also refers to the market power of
the firm or the ability to set or control the
price of products in the market. The level
of pricing power depends on whether the
firm can regulate the level of demand and
supply of the products.
10
Factors that Determine the Competition
Level in the Marketplace

11
Factors that Determine the Competition
Level in the Marketplace
Degree of knowledge of economic agents

This refers to the availability or

limitation of economic information to the
players in the market like price, costs of
materials, demand level and supply
conditions.
12
Factors that Determine the Competition
Level in the Marketplace

13
 Classification of
Market Structures
 ▪ Perfect
Competition
▪
“Monopoly”
▪
Monopolistic
▪ Oligopoly
15
PERFECT COMPETITION
> It presents an ideal market
condition for the customers
and suppliers.

16
 PERFECT COMPETITION
> Given here are the descriptions of a perfect
competition in market considering the
factors determining the degree of
competition.
1. There are a lot of customers and
suppliers in specific market, but they
only show a very little or no impact on
the prices of items.
17
 PERFECT COMPETITION
> Given here are the descriptions of a perfect
competition in market considering the
factors determining the degree of
competition.
2. Highly similar products or
homogenous products are sold by the
sellers in perfect competition.

18
 PERFECT COMPETITION
> Given here are the descriptions of a perfect
competition in market considering the
factors determining the degree of
competition.
3. The sellers have ease of entry or exit
from the markets as there are no barriers
to enter into or exit from the industry”..

19
 PERFECT COMPETITION
> Given here are the descriptions of a perfect
competition in market considering the
factors determining the degree of
competition.
4. In a perfectly competitive
environment, the market players are
price takers.

20
 PERFECT COMPETITION
> Given here are the descriptions of a perfect
competition in market considering the
factors determining the degree of
competition.
5. With regards to information of economic
agents, the buyers and suppliers are well-
informed of the pricing, costs, and other
relevant information for them to come up with
their economic decisions.
21
PERFECT COMPETITION

22
 IMPERFECT
COMPETITION
> This type of competition
exists when there are
concepts of perfectly
competitive environment that
are not met.
23
 Three Market Structures
Under Imperfect Competition

24
*Monopoly is from the
Greek term ”, meaning
“one seller”. Monopoly
* Pure monopoly is not a
common market situation
compared to other market
structures.
* The two extreme market
structures are perfect or
pure competition and pure
monopoly.

25
* Monopoly exists when a
single or one seller has
control of entire supply of
raw materials .
Monopoly
o Only one seller offers a
particular item in the
market.
o There is no close
substitute or no alternative
store or firm for the
monopolist.

26
27
• The type of product in
monopoly is highly
differentiated or NO
CLOSE SUBSTITUTE.
Monopoly
• “There is monopoly in
the market because of
high barriers to entry of
the players who are
trying to take advantage of
the enormous market.

28
• “The monopolist is the
only supplier in the
market so it is capable of
setting the price for its
Monopoly
products through
determining the output
level or supply level in the
market.

• The consumers have

very little knowledge
about the cost of materials
or pricing methods of
monopolists.
29
• The producer also enjoys
economy of scale which
means savings from
production of large range
Monopoly
of outputs.

• “Consumers might have

bad perception about
monopoly for they fear
that monopolist can just
easily jack up the market
price because
consumers have no other
choice but to buy from that
single seller of product.

30
• Consumers sometimes
suffer from poor quality of
the service or good that is
offered in the
Monopoly
market by the monopolist.

31
32
Another market structure
under imperfect
competition is Monopolistic
monopolistic competition
which has the qualities of Competition
both the perfect
competition and
monopoly.

33
Many firms exist in the
market under
monopolistic competition. Monopolistic
o This is the characteristic
Competition
of perfect competition that
is the same in
monopolistic
competition.
o Many firms offer similar
items in the market but
may have different brands.

34
35
• Firms sell heterogenous
or differentiated products.
Monopolistic
• “Sellers can freely enter
or exit in the market
Competition
which brings about the
presence of many different
suppliers in the market.

36
• Since the sellers are
conditioning the market
that they have something Monopolistic
different to offer
compared to their Competition
competitors, they have the
ability to set higher prices
for their products.

37
38
39
An oligopoly is a type
of imperfect Oligopoly
competition for its
industry is composed
of few firms that
interact with each
other.

40
• “Few sellers account for
most of or total production
since barriers to entry Oligopoly
levels up the difficulty
for new players to enter
the market.

• “These firms interact

with each other and
interdependence among
them exists. ”

41
Oligopolists collude
with each other to Monopolistic
raise prices which
sometimes affect the Competition
final
consumers due to
possible existence of
poor service or goods.

42
• “Barriers to entry and
exit in oligopoly may
come in the form of Monopolistic
economy of scale, image
or reputation of the Competition
suppliers and strategic and
legal barriers such as the
grant of
patents/franchises,
existence of loyal
customers, big capital
investments and
specialized input, and
control of supply of raw
43
materials by few
Strategic systems of firms
under oligopoly or
cooperative behavior in Monopolistic
oligopoly usually takes
the form of price-fixing or Competition
output-setting agreements
such as the one
maintained by the OPEC
(Organization of
Petroleum Exporting
Countries). ”

44
45