Professional Documents
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Market Structures
Market Structures
Market Structures
Some Basic Ideas
Market for a product:
1. Many sellers
2. Many buyers
3. Every seller sells identical (homogenous)
products.
4. Resources are perfectly mobile.
5. Information on price, quality etc. freely
flows between buyers and sellers.
6. Free entry and exit of sellers
The description of perfectly competitive
market is an extreme one.
For example ‘Complete free flow of
information’ is almost impossible in reality.
But in such markets flow of information is
smoother than in other markets.
1. One seller
2. Many buyers
3. Barriers to entry for new sellers
4. The product has no substitutes
Why monopoly exists? Why does a second
firm not enter the market?
1. Few seller
2. Many buyers
3. Product may be homogenous or
differentiated
4. Entry of new firms is possible but relatively
difficult
5. Decisions on price, quantity, quality or
variety, advertising are taken on the basis
of strategic interaction with other players.
• Market for Aerated Soft Drinks
2 or 3 sellers and many buyers
Identical products
Identical prices charged for each variety
• High-end Fashion Industry
A few fashion designers (big names)
Differentiated products
Different prices
• Automobiles Market
A few big firms sellers and many buyers
differentiated prices
Some Characteristics of Oligopolistic markets:
1. Many seller
2. Many buyers
3. Product may be homogenous or
differentiated
4. Free entry and exit of firms
5. Variety of products is almost
unlimited.
• Restaurants
Many sellers and many buyers
differentiated products
for each variety of food differentiated
prices charged by different sellers
depending on variation / ambience etc.