MARKET

STRUCTUR
E
ANNA FAUJIA B. NAPIRE
MARKET
Consists of all firms and
individuals willing and able to
buy or sell a given product at a
given place and time.

MARKET
STRUCTURE
Describes the competitive
environment in the market for any
goods or service.
 FOUR IMPORTANT INDUSTRY
CHARACTERISTIC
1. The number and size distribution of active buyers and
sellers and potential entrants
2. The degree to which products are similar or dissimilar
3. The amount and cost of information about product price
and quality
4. Conditions of entry and exit
VITAL ROLE OF POTENTIAL
ENTRANT
A potential entrant is an
individual or firm posing a
sufficiently credible threat of
market entry to affect the price-
output decisions of incumbent
firms.
FACTORS THAT SHAPE THE
COMPETITIVE
ENVIRONMENT

1. PRODUCT DIFFERENTIATION
2. PRODUCTION METHODS
3. ENTRY AND EXIT CONDITIONS
PRODUCT DIFFERENTIATION
PRODUCTI
ON
METHODS
ENTRY AND EXIT
CONDITIONS
1. BARRIER TO 2. BARRIER TO 3. BARRIER TO EXIT
ENTRY MOBILITY any restriction on the
any factor or industry any factor or industry ability of incumbents to
characteristic that creates characteristic that creates an redeploy assets from one
an advantage for advantage for large leading industry or line of business
incumbents over new firms over smaller non to another.
arrivals leading rivals
MARKET STRUCTURE
SPECTRUM
PERFECT COMPETITION
» All firms sell an identical product
» All firms are price takers
» All firms have relatively small market
share
MONOPOLY
1. Single seller
2. Unique product
3. The firm is the price maker
4. Entry or exit is blocked
TYPES OF MONOPOLIES
1. Natural Monopoly – market situation where the costs of production are
minimized by having a single firm produce the product (e.g. public utility
companies, oil pipeline in Alaska)
2. Geographic Monopoly – based on absence of other sellers in a certain
geographic area (e.g. gas station or drugstore in small town)
3. Technological Monopoly – based on ownership or control of a
manufacturing method, process or other scientific advance (e.g. certain
pharmaceutical drugs) a. Patent – exclusive right to manufacture, use or
sell invention (usually good for 20 years). b. Copyright – authors, art
(good for their lifetime plus 50 years)
4. Government Monopoly - monopoly owned and operated by the
government (e.g. military, water and sewage)
MONOPOLISTIC COMPETITION

» Large numbers of firms compete

» Each firm produces different product
» Firms compete on product quality,
price and marketing
» Firms are free to enter and exit the
industry
OLIGOPOLY
 Few large firm
 Entry is hard
 Price makers
COMPETITIVE
MARKET
CHARACTERIS
TICS
Examples of Competitive Market
1. Profit Maximization 2.» Role
  of Marginal Analysis
Imperative
 Study of changes caused by
• Normal profit economic decisions
• Economic profit  Used as a decision-making tool to
• Economic Losses help them maximize their
potential profits.
COMPETITIVE MARKET
EQUILIBRIUM
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THANKS!
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