Market Structures

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Market Structures

• Types of Markets-How do firms sell their products?

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Perfect (pure) Competition-All Kinds of Fun and
Excitement

• Characteristics of a PC Market
• Very large of sellers
• Standardized product (agriculture)
• Price Takers
• Market (consumers) sets price
• Free entry and exit
• start up costs/technologies are such that anyone
  can freely enter the market

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The Pure Monopoly-Fun and Excitement Single
Firm-Industry

• Single seller
• No close subs
• Price Maker
• High barriers to entry-restricted by technology,
  patents, money

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Barrier to Entry

• Economies of Scale
• -cost of entering industry size of existing
  monopoly discourages others from entering
• Patents and licenses
• Ownership of resources-
• Ex. DeBeers Diamond company markets 70 of all
  diamonds in world
• Pricing
• Ex. lowering prices to drive out competition

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Monopolistic Competition

• Large sellers
• Small market share
• Differentiated products
• Varying quality, style, service, brand name
• Easy entry/exit
• limited barriers to entry
• non-price competition like advertising

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Non-price Competition

• Product differentiation
• Idea that we view products as being different
• Can be based on quality, style, branding
• Can lead to poor choices (pricequality)
• Advertising
• firms must balance price, product, and costs of
  developing demand to maximize profit

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Oligopoly

• Products can be similar or differentiated
• Key is market share and price control
• Profits of firm not only depend on its own price,
  but also on price of competitor
• High barriers to entry
• oil industry operates
• as world wide cartel