What is the meaning of market structure?

market structure. Four basic types of market structure are (1) Perfect competition:
many buyers and sellers, none being able to influence prices. (2) Oligopoly: several
large sellers who have some control over the prices. (3) Monopoly: single seller with
considerable control over supply and prices.

Market structure is best defined as the organisational and other characteristics of a

market. The interconnected characteristics of a market, such as the number and relative
strength of buyers and sellers and degree of collusion among them, level and forms of
competition, extent of product differentiation, and ease of entry into and exit from the
market
Four basic types of market structure are (1) Perfect competition: many buyers and
sellers, none being able to influence prices. (2) Oligopoly: several large sellers who
have some control over the prices. (3) Monopoly: single seller with considerable control
over supply and prices. (4) Monopsony: single buyer with considerable control over
demand and prices.

Perfect competition

Theoretical condition of a market where prices reflect complete mobility of resources

and freedom of entry and exit, full access to information by all participants, relatively
homogeneous products, and the fact that no one buyer or seller, or group of buyers or
sellers, has any advantage over another
Perfect Competition - Assumptions and Characteristics

Perfect competition describes a market structure whose assumptions are strong and

therefore unlikely to exist in most real-world markets

Perfect Competition – a Pure Market

 We can take some useful insights from studying a world of perfect competition
and then comparing and contrasting with imperfectly competitive markets and
industries

 Economists have become more interested in pure competition partly because of

the growth of e-commerce as a means of buying and selling goods and
services. And also because of the popularity of auctions as a device for
allocating scarce resources among competing ends.

What are the main assumptions for a perfectly competitive market?

1. Many sellers in the market - each of whom produce a low percentage of market
output and cannot influence the prevailing market price – each firm in this market
is a price taker - i.e. it has to take the market price
2. Many individual buyers - none has any control over the market price
3. Perfect freedom of entry and exit from the industry. Firms face no sunk
costs and entry and exit from the market is feasible in the long run. This
assumption means that all firms in a perfectly competitive market make normal
profits in the long run
4. Homogeneous products are supplied to the markets that are perfect
substitutes. This leads to each firms being “price takers" with a perfectly elastic
demand curve for their product
5. Perfect knowledge – consumers have all readily available information about
prices and products from competing suppliers and can access this at zero cost –
in other words, there are few transactions costs involved in searching for the
required information about prices. Likewise sellers have perfect knowledge about
their competitors
6. Perfectly mobile factors of production – land, labour and capital can be
switched in response to changing market conditions, prices and incentives. We
assume that transport costs are insignificant
7. No externalities arising from production and/or consumption

Oligopoly

An oligopoly is a market structure in which a few firms dominate. When

a marketis shared between a few firms, it is said to be highly concentrated.
Although only a few firms dominate, it is possible that many small firms may also
operate in the market.

OLIGOPOLY, CHARACTERISTICS: The three most important characteristics

of oligopoly are: (1) an industry dominated by a small number of large firms, (2)
firms sell either identical or differentiated products, and (3) the industry has
significant barriers to entry.

Three conditions for oligopoly have been identified. First,

an oligopolistic market has only a few large firms.
This condition distinguishes oligopoly from monopoly, in which there is just one
firm. Second, an oligopolistic market has high barriers to entry.
A monopoly is one firm, duopoly is two firms and oligopoly is two or more firms.
There is no precise upper limit to the number of firms in an oligopoly, but the
number must be low enough that the actions of one firm significantly influence
the others.
The distinctive feature of an oligopoly is interdependence. Oligopolies are
typically composed of a few large firms. Each firm is so large that its actions
affect market conditions. ... All firms in a PC market are price takers, as current
market sellingprice can be followed predictably to maximize short-term profits.
 Explaining Natural Monopoly

What is a natural monopoly?

We may state the features of monopoly as:

 One Seller and Large Number of Buyers: The monopolist's firm is the only firm; it
is an industry. ...
 No Close Substitutes: There shall not be any close substitutes for the product
sold by the monopolist. ...
 Difficulty of Entry of New Firms: ...
 Monopoly is also an Industry: ...
 Price Maker:

Definition of 'Monopoly' Definition: A market structure characterized by a single seller,

selling a unique product in the market. In a monopoly market, the seller faces no
competition, as he is the sole seller of goods with no close substitute. ... He enjoys the
power of setting the price for his goods.

The different types of monopoly are as follows:

 Private monopoly: The monopoly firm owned and operate by private individuals is
called the private monopoly. ...
 Public monopoly: ...
 Absolute monopoly: ...
 Imperfect monopoly: ...
 Simple or single monopoly: ...
 Discriminative monopoly: ...
 Legal monopoly: ...
 Natural monopoly:
The four key characteristics of monopoly are: (1) a single firm selling all output in a
market, (2) a unique product, (3) restrictions on entry into and exit out of the industry,
and more often than not (4) specialized information about production techniques
unavailable to other potential producers.

The four key characteristics of monopoly are: (1) a single firm selling all output in a
market, (2) a unique product, (3) restrictions on entry into and exit out of the industry,
and more often than not (4) specialized information about production techniques
unavailable to other potential producers.
Characteristics of a Monopoly Market Structure
 A Lack of Substitutes. One firm producing a good without close substitutes. ...
 Barriers to Entry. There are significant barriers to entry set up by the
monopolist. ...
 Competition. There are no close competitors in the market for that product.
 Price Maker. ...
 Profits.

A natural monopoly does not mean that there is only one business operating in

the market

There may be many smaller businesses operating profitably in smaller 'niche'

segments of a market (however that is defined)

With a natural monopoly the economies of scale available to the largest firms
mean that there is a tendency for one business to cominate the market in the
long run

ISRAEL ECONOMY

Economy - overview: Israel has a technologically advanced free market economy. Cut

diamonds, high-technology equipment, and pharmaceuticals are among its
leading exports. Its major imports include crude oil, grains, raw materials, and military
equipment.

The natural resources of Israel include potash, copper ore, natural gas, phosphate

rock, magnesium bromide, clays and sand.

Today, most of Israel's food is domestically produced and supplemented by imports,

mainly of grain, oilseeds, meat, coffee, cocoa, and sugar, all of which are more than
covered by agricultural exports. Farm production consists largely of dairy and poultry
products.

Tourism in Israel is one of Israel's major sources of income, with a record 3.6 million
tourist arrivals in 2017, and 25 percent growth since 2016 and contributed NIS 20
billion to the Israeli economy making it an all-time record.

Israel's quality university education and the establishment of a highly motivated and

educated populace is largely responsible for ushering in the country's high technology
boom and rapid economic development.[28] With its strong educational infrastructure and
high quality incubation system for new cutting edge ideas to create value driven goods
and services has allowed the country to create a high concentration of high-tech
companies across the country financially backed by a strong venture capital industry.
[29]
 Its central high technology hub "Silicon Wadi" is considered second in importance
only to its Californian counterpart.[30][31][32][33] Numerous Israeli companies have been
acquired by global corporations for their reliable and quality corporate personnel. [34]
Agriculture
The Kibbutzim, collective communities in Israel traditionally based on agriculture, played
an important role in Israel's economy until the late 1970s.
While Israel imports substantial quantities of grain (approximately 80% of local
consumption), it is largely self-sufficient in other agricultural products and food stuffs.
For centuries, farmers of the region have grown varieties of citrus fruits, such as
grapefruit, oranges and lemons. Citrus fruits are still Israel's major agricultural export. In
addition, Israel is one of the world's leading greenhouse-food-exporting countries
including farm produce as well as agricultural inputs and technology. [92]

Financial services
Israel has over 100 active venture capital funds operating throughout the country with
$10 billion USD under management. Israel's venture capital sector has rapidly
developed from the early 1990s, and has about 70 active venture capital funds (VC), of
which 14 international VCs have Israeli offices. Israel's thriving venture capital
and business-incubator industry played an important role in financing the country's
flourishing high-tech sector.
Israel's thriving venture capital industry has played an important role in funding the
country's booming high-technology sector. The country is now teeming with hundreds of
prosperous Israeli private equity and venture capital firms looking to invest in the next
potential million or billion dollar business startup. Numerous Israeli high tech companies
have been acquired by global corporations for its reliable corporate management and
quality personnel.[34] In addition to venture capital funds, many of the world's leading
investment banks, pension funds, and insurance companies have a strong presence in
Israel committing their funds to financially back Israeli high-tech firms and benefit from
its prosperous high tech sector.
High technology

Science and technology in Israel is one of the country's most highly developed and
industrialized sectors. The modern Israeli ecosystem of high technology is highly
optimized making up a significant bulk of Israeli economy. The percentage of Israelis
engaged in scientific and technological inquiry, and the amount spent on research and
development (R&D) in relation to gross domestic product (GDP), is among the highest
in the world.
As a result of the country's highly renowned and creative start-up culture, Israel is often
referred to as the Start-up Nation
Natural gas
Electricity
Since the founding of the state through the mid-2010s decade, the state-owned
utility, Israel Electric Corporation (IEC) had an effective monopoly on power generation
in the country.
Facing increasing demand for electricity and concerned about the low reserve situation,
the government of Israel began taking steps to increase the supply of electricity and
operating reserve, as well to reduce the monopoly position of the IEC and increase
competition in the electricity market starting in second half of the 2000s decade. It
instructed the IEC to construct several new power stations and encouraged private
investment in the generation sector. By 2015, the IEC's share of total nationwide
installed electric generation capacity had fallen to about 75%, with the company then
possessing an installed generation capacity of about 13.6 gigawatts (GW). Since
2010, Independent Power Producers have constructed three new gas-fired combined
cycle power stations with a total generation capacity of about 2.2 GW, while various
industrial concerns constructed on-premises cogeneration facilities with a total electricity
output of about 1 GW, and which are licensed by the electric authority to sell surplus
electricity to the national grid at competitive rates.
Industrial manufacturing
Israel has a large industrial capacity with a well-developed chemical industry with many
of its products aimed at the export market. Israel Chemicals is one of largest fertilizer
and chemical companies in Israel and its subsidiary, the Dead Sea Works in Sdom is
the world's fourth largest producer and supplier of potash products. The company also
produces other products such as magnesium chloride, industrial salts, de-icers, bath
salts, table salt, and raw materials for the cosmetic industry. One of the country's largest
employers is Israel Aerospace Industries which produces mainly aviation, space, and
defense products. Another large employer is Teva Pharmaceutical Industries, one of the
world's largest pharmaceutical companies, employing 40,000 people as of 2011. It
specializes in generic and proprietary pharmaceuticals and active pharmaceutical
ingredients. It is the largest generic drug manufacturer in the world and one of the 15
largest pharmaceutical companies worldwide. Industrial production of metals, electrical
equipment, construction materials, consumer goods, and textiles, as well as food
processing also form a significant part of the manufacturing sector.
Defense contracting
Israel is one of the world's major exporters of military equipment, accounting for 10% of
the world total in 2007. Three Israeli companies were listed on the 2010 Stockholm
International Peace Research Institute index of the world's top 100 arms-producing and
military service companies: Elbit Systems, Israel Aerospace Industries and RAFAEL.
The Defense industry in Israel is a strategically important sector and a large employer
within the country. It is also a major player in the global arms market.  There are over
150 active defense companies based in the country with combined revenues of more
than 3.5 billion USD annually. Israel is considered to be the leading UAV exporter in the
world. According to the Stockholm International Peace Research Institute, Israeli
defense companies were behind 41% of all drones exported in 2001–2011.
Tourism
Tourism is one of Israel's major sources of income in the country, attracting 3.6 million
foreign tourists in 2017, yielding a 25 percent growth since 2016 and contributed NIS 20
billion to the Israeli economy making it an all-time record.
Industrial manufacturing
Israel has a large industrial capacity with a well-developed chemical industry with many
of its products aimed at the export market. Israel Chemicals is one of largest fertilizer
and chemical companies in Israel and its subsidiary, the Dead Sea Works in Sdom is
the world's fourth largest producer and supplier of potash products. The company also
produces other products such as magnesium chloride, industrial salts, de-icers, bath
salts, table salt, and raw materials for the cosmetic industry.
One of the country's largest employers is Israel Aerospace Industries which produces
mainly aviation, space, and defense products.
Another large employer is Teva Pharmaceutical Industries, one of the world's largest
pharmaceutical companies, employing 40,000 people as of 2011. It specializes
in generic and proprietary pharmaceuticals and active pharmaceutical ingredients. It is
the largest generic drug manufacturer in the world and one of the 15 largest
pharmaceutical companies worldwide.
Industrial production of metals, electrical equipment, construction materials, consumer
goods, and textiles, as well as food processing also form a significant part of the
manufacturing sector.
Diamond industry
Israel is one of the world's three major centers for polished diamonds, alongside
Belgium and India.

ZAMBIA

Since independence, in 1964 Zambia’s industry has taken several phases and faces.
The continuous changes in the industrial nature of the country attributed to several
reasons ranging from political, economical and external influence especially from the
Command Economy where the Government centralized service delivery and
development, Zambia’s industrial base was wide but very weak as citizens owned
nothing in terms of companies and private firms. Zambia contained 235 parastatals
that showed as though the industrial base was wide, but these entities were running
huge loses hence depended heavily on subsidies from the State. Almost all industries
the mining, communication, energy, agriculture, manufacturing and processing sectors
were experiencing losses as a result of political mismanagement, lack of recapitalization
and external factors like the oil crisis of 1980s. These industries from 1972 to 1991
operated in the protected environment in which competition and quality were not
significant indicators of success, but after the change of government in1991, came
under increasing pressure to compete in an environment that was rapidly changing and
becoming difficult to assess and predict. Hence there was industrial transformation after
Zambia’s adoption of free market system. The country saw the birth and death of certain
industries. With the liberalisation of the economy in the early 1990s, we have seen a
major shift in market structures in the name of structural adjustment and modernisation.

The Telecommunications Industry has been categorized as an oligopoly because it is

dominated by very few firms who compete for the same customer base. These firms
operating in the market seem to deter any entry by other firms into the industry on the
pretext that the market is very small, hence cannot accommodate numerous firms

This study evaluates the degree of competition in the Zambian banking sector in the
wake of dynamic market shifts induced by entry of new foreign banks and privatisation
of the state-owned bank. Zambian banks earned their revenue under conditions of
monopolistic competition. Increased foreign bank penetration and divestiture of state
ownership in banking can heighten competitive pressures in the banking sector. Thus,
the main policy lessons drawn from the analysis is that competitive conditions could be
further enhanced by easing regulatory impediments and in the long-run, allowing more
foreign bank participation could spur competitive conduct in the industry.