As you all know, market is an entity or the place where the sellers and the buyers meet to exchange goods or services for an equivalent profit. This market is spoken across different industries with different causes. After decades of evolution of marketers and their studies, we finally have the four major market structures that are explained below.
1. PERFECT COMPETITION
A market structure with perfect competition is an idealized version of a free market in which many small businesses create identical goods, making it impossible for any one company to control the market price. This setting guarantees that supply and demand alone determine prices, enabling the highest levels of allocative and productive efficiency. Perfect knowledge, a large number of consumers and sellers, the absence of entrance or exit barriers, and the presumption that businesses are price takers are all traits of perfect competition. Long-term economic earnings in such a market are often zero since any anomalous short-term profits draw in more competitors, which raises supply and lowers prices.
For Example,
In particular, the market for staple commodities like wheat is one instance of an agricultural industry market that nearly mimics perfect competition. Numerous farmers create nearly similar goods in this market, which they then sell in bulk. Farmers that sell their wheat at the going rate on the market are referred to as price takers because they have little control over the wheat's total market price. The wheat market is further in line with the ideals of perfect competition due to the simplicity of entry and exit in farming as well as the accessibility of market data on crop pricing.
2. MONOPOLISTIC COMPETITION
When many companies provide comparable but distinct items, a market structure known as monopolistic competition results, giving each company a certain amount of market dominance. Businesses engaged in monopolistic competition are able to maintain a downward-sloping demand curve by differentiating their products through branding, features, quality, and other factors. This implies that a business can set its rates to a certain degree without losing all of its clients to rival businesses. Since there are few obstacles to join and exit in the market, new businesses can enter it when established ones see above-average profits. This eventually results in typical profits. Competition amongst businesses in terms of price, quality, and marketing creates a vibrant and varied marketplace.
For Example,
The restaurant business is a classic illustration of monopolistic competition. To set themselves apart from the competition, restaurants provide a broad selection of cuisines, eating experiences, and price points. A restaurant's distinctive menu offerings, environment, level of service, or branding can all help it draw in a devoted clientele despite the abundance of eateries in any particular location. With this distinction, restaurants retain some degree of control over their prices even in the face of competition from other dining establishments. Due to the comparatively low entry hurdles, new eateries pop up regularly, which adds to a dynamic and constantly shifting market environment.
3. OLIGOPOLY
A high concentration of market power results from a small number of dominant major enterprises in an oligopolistic market. Since these businesses depend on one another, their decisions have a big effect on each other. Strategic actions, including fixing prices, forming cartels to maximize profits, or engaging in collusion, are frequently the result of this dependency. New competitors are unable to quickly enter the market because of high barriers to entry. Non-price competition, such advertising and product innovation, is important in an oligopoly. Products might be identical or distinctive. Depending on how much the participating firms cooperate or compete, the market outcomes under an oligopoly can be either competitive or monopolistic.
For Example,
A high concentration of market power results from a small number of dominant major enterprises in an oligopolistic market. Since these businesses depend on one another, their decisions have a big effect on each other. Strategic actions, including fixing prices, forming cartels to maximize profits, or engaging in collusion, are frequently the result of this dependency. New competitors are unable to quickly enter the market because of high barriers to entry. Non-price competition, such advertising and product innovation, is important in an oligopoly. Products might be identical or distinctive. Depending on how much the participating firms cooperate or compete, the market outcomes under an oligopoly can be either competitive or monopolistic.
4. MONOPOLY
One company that produces and sells a good or service exclusively, with no close substitutes, is the hallmark of a monopolistic market system. The monopolist has tremendous market power as a result of its special position, which allows it to set pricing and output targets without considering the competitors. A high barrier to entry, such as control over necessary resources, substantial beginning costs, legislative constraints, or technological supremacy, is frequently the cause of the absence of competitors. In a monopoly, the company produces at a level where marginal cost and marginal income equal to maximize profits; this frequently leads to higher pricing and lower output than in marketplaces with more competitors. Inefficiencies and possible reductions can result from a lack of competition when monopolists prioritize profit over innovation and customer satisfaction.
For Example,
A good example of a monopoly is a utility firm that supplies power in a certain area, as Consolidated Edison (Con Edison) in some areas of New York. Millions of consumers in Con Edison's service region rely solely on it for their electrical needs; the utility industry's inherent monopolies prevent direct competition. Potential rivals have significant obstacles to entry because to the significant infrastructure investment needed to produce and transmit electricity as well as legal protections. Con Edison can thereby affect rates and service terms, and its operations are monitored by regulatory agencies such as the Public Service Commission to prevent abuse of monopoly power and to guarantee that the needs of the general public are satisfied.
____________________________________________________________________________
For more posts regarding Marketing and Research visit our Page!!!! And if you want us to post on any specific marketing concept or any scholastic topic please leave a comment below, We'll do our best to work on it....
You can contact us for any queries or suggestions regarding the subject through mail or via LinkedIn.
Happy Reading :-)
Comentarios