Market Structure

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Introduction to Markets and Pricing Strategies
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INTRODUCTION

• Market is defined as a place or point at which
  buyers and sellers negotiate their exchange of
  well-defined products or services.
• A market is any place where the sellers of a
  particular good or service can meet with the
  buyers of that goods and service where there is a
  potential for a transaction to take place. The
  buyers must have something they can offer in
  exchange for there to be a potential transaction.

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Types of Markets
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MARKETS ON THE BASIS OF COMPETITION

• On the basis of Competition Markets are
  classified into two types
• (a) Perfect Competition
• (b) Imperfect Competition
• Perfect Competition It is a market where there
  exist large number of sellers and buyers with
  perfect competition
• Imperfect Competition It is a market which is
  further divided into
• (a) Monopoly (b) Duopoly (c) Oligopoly (d)
  Monopolistic Competition

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What is Perfect Competition?

• The following are the features of perfect
  competition
• (i) Large Number of buyers and sellers
• (ii) Homogeneous Products or services
• (iii) Freedom to enter or exit the market
• (iv) Perfect information available to the buyers
  and sellers
• (v) Perfect mobility of factors of production

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What is Imperfect Competition?

• A competition is said to be imperfect when it is
  not perfect.
• In other words, when any or most of the above
  conditions do not exist in a given market it is
  referred to as an imperfect competition
• Based on the number of buyers and sellers, the
  structure of market varies as below
• Poly refers to seller and Psony refers to
  buyer.
• Imperfect competition markets are classified as
• (a) Monopoly
• (b) Monopolistic Competition
• (c) Duopoly
• (d) Oligopoly
• (e) Monopsony
• (f) Duopsony
• (g) Oligopsony

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What is Monopoly?

• If there is only one seller, monopoly market is
  said to exist.
• An extreme version of imperfect market is
  monopoly.
• Here a single seller completely controls the
  entire industry.

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Features of Monopoly?

• Single firm dealing with a particular product or
  service
• No close substitutes and no competitors
• Can decide either the price or quantity, not both
• Monopoly may be created through statutory grant
  of special privileges such as licenses, permit,
  patent rights, and so on

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Is Monopoly Desirable?

• Inefficient allocation of resources Restricts
  the output of his product to increase the price
  and maximize profits
• Exploitation of consumers By charging higher
  prices
• Wide gap between rich and poor No consideration
  whether the consumer is rich or poor
• Unfair trade practices blocking the entry of
  new firms
• Restricted Output to have a control over the
  price in the market
• Restricted scope to RD since no threat doesnt
  take initiative to invest in research and
  development

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What is Monopolistic Competition?

• When large number of sellers produce
  differentiated products, monopolistic competition
  is said to exist.
• Products offered are close substitutes
• They are similar but not identical.
• A Product is said to be differentiated when its
  important features vary.
• Example Electrical Companies that manufacture
  Air-conditioning with differentiated feature of
  heating the room

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What is Duopoly?

• Duo means two Poly means sellers.
• If there are two sellers, duopoly is said to
  exist.
• For example lets assume that we have only two
  soft drink manufacturing companies like Pepsi and
  Coke this market is said called Duopoly.
• Basic facilities for satellite communication are
  presently provided by Mahanagar Telephone Limited
  (MTNL) and Videsh Sanchar Nigam Limited (VSNL)

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What is Oligopoly?

• Another variety of imperfect competition is
  oligopoly
• Oligo means few and poly means sellers.
  Oligopoly refers to few sellers
• The examples are the car manufacturing companies
  such as (Maruti-Suzuki, Hindustan Motars, Daewoo,
  Toyota and so on. )Newspapers such as (The Hindu,
  Indian Express etc..)

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What are Monopsony, Duopsony, Oligopsony ?

• Psony refers to buyer, Mono refers to single,
  Duo refers to two, Oligo refers to few
• Monopsony - If there is only one buyer, monopsony
  market is said to exist. Food Corporation of
  India is the only government orgnisation that
  purchases the agricultural produce such as rice
  and so on.
• Duopsony If there are two buyers, dupsony is
  said to exist
• Oligopsony If there are few buyers, oligopsony
  is said to exist. For example There are quite
  good number of computer assembly operators who
  buy the computer components on wholesale basis

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• Thank You
• Change your thoughts and you change your world
  
• Norman Vincent Peale
• Prepared by Naveen Joshi