Monopoly and Oligopoly
There are different market structures in economics based on the characteristics of the market. They are determined by the number of sellers and buyers, the nature of the product, conditions of entry and exit, as well as economies of scale. The market structure influences the pricing of a product and the supply of commodities. The basic characteristics of the different types of market structures are given below.
Pure competition-There is a number of firms having insignificant market share. The firms produce homogeneous products which are perfect substitutes .They have the freedom to enter and exit from the market. Each firm is independent and their actions do not affect the price of the product. The market demand and supply determines the commodity price, hence the firms are price takers. (The Economic Times 2015).In reality such markets does not exist.
Monopoly-In this market structure there is only one firm which produces goods that does not have a close substitute. The entry of additional firms is restricted hence a single firm comprises the whole industry. The buyers have limited choice and the firm enjoys maximum profit.
Monopolistic competition-There is more number of firms with differentiated products. The entry and exit is easy for firms under this market structure. There are many buyers and few sellers. Selling costs for advertisements and other promotional activities are incurred due to the competitive nature of the products sold. Oligopoly-This has a few sellers with differentiated or standardized products. The entry and exit of firms is not easy. Pricing and output decisions are mutually dependent. Non price competition like customer care exists between the firms (McConnell and Brue, 2004).
