Market Structures

1
Market Structures

2
Market Structures

• What is the primary aim/goal of businesses?
• To maximize profits
• What is competition?
• Striving against others to reach an objective

3
4 Types of Market Structure

• Pure/Perfect Competition
• Large number of buyers and sellers
• Identical product
• Well informed buyers and sellers
• Price Takers!
• Low barriers for entry/exit

More Competition Less Competition
4
Pure/Perfecct Competition
Many buyer/sellers
Identical Products
5
(No Transcript)
6
Imperfect Competition

• Most USA markets are imperfect competition
• Farming is perfectly competitive.
• A market is imperfect when it lacks one or more
  of the characteristics of Perfect Competition

7
Forms of Imperfect Competition

• Monopolistic competition
• Large of Buyers and sellers
• Product Differentiation
• Non Price Competition
• Most markets in USA are monopolistic competition

8
Monopolistic Competition

• Meets all condition of perfect competition except
  for identical products.
• Product differentiation
• Monopolistic competitors use nonprice competition
• Advertising, giveaways, or other promotions

More Competition Less Competition
9
What are some examples?
10
Monopolistic Competition
Gap Levis Lucky
Same as pure competition except for product
differentiation
11
Review

• Classify each product as perfect comp (pc) or
  monopolistic comp (mc)
• Toothpaste
• Wheat
• Coal
• Books
• CDs
• Computer software
• http//www.youtube.com/watch?v9Hxy-TuX9fsfeature
  related

12
Oligopoly

• A few very large sellers dominate the industry
• Oligopolists act independently by lowering prices
  soon after the first seller announces the cut
• Collusion formally agree to set prices
• Heterogeneous products
• Engage in price wars
• High barriers to entry

More Competition Less Competition
13
What are some examples?
14
Oligopoly
Few producers control supply and price
15
Coca-Cola Classic

• Coca-Cola classic
• Sprite
• Dasani
• Barq's
• Dannon
• Nestea
• Rockstar
• Evian

• Fanta
• Fresca
• Minute Maid
• Mr. Pibb
• Powerade
• Seagrams Ginger Ale Mixers
• TAB

16
Pepsi-co

• Aquafina
• Pepsi
• Mountain Dew
• Sierra Mist
• Sobe
• Lipton Brisk Tea

• MUG Root Beer
• Slice
• Gatorade
• Dole Juice
• Tropicana

17
Cadbury Schweppes

• 7 Up
• Canada Dry
• Clamato
• Dr Pepper
• Hawaiian
• Punch
• Mott's
• Orangina
• Snapple

18
Toyota

• Toyota
• Scion
• Lexus

19
Chrysler

• Chrysler
• Jeep
• Dodge

20
General Motors

• Chevrolet
• Buick
• Pontiac
• GMC
• Saturn
• Hummer
• SAAB
• Cadillac

21
What is missing?
22
Monopoly

• Only one seller of a particular product
• Few monopolies

23
Monopoly

• One seller dominates the market with no close
  substitutes
• Sets prices
• High barriers

More Competition
Less Competition
24
Monopoly

• Natural Monopoly - efficient production by a
  single supplier

25
Monopoly

• Geographic Monopoly - small town

26
TechnologicalMonopoly

• In order for the inventor to make money and keep
  new ideas flowing
• Patients on inventions

27
Government Monopoly

• It is a product that the government should
  provide because they are the government
• National defense, disposal of nuclear materials

28
Market Failures

• Inadequate Competition
• Lack of competition which causes either buyers or
  sellers to control the market
• Inadequate Information
• Consumers or producers lack enough information
  about a market to allow it to work properly
• Externalities
• Unintended positive or negative side-effects to a
  3rd party because of a market transaction
• What are some examples?
• http//www.youtube.com/watch?vDOuBxJNIFkYfeature
  related
• Public Goods
• Goods used by all and directly paid for by none
• What are some examples?

29
(No Transcript)
30
4 Ways the Government regulates businesses

• 1- Anti-trusts Laws
• 2- Non-discrimination laws
• 3-Public Disclosure
• 4-Federal Agencies p. 180

31
3-2-1

• 3 things you learned
• 2 things you want to learn more about
• 1 question