COMPETITION

Business Economics

Market Structure

Nature & degree of competition among firms in same industry.

Industry - companies engaged in a particular kind of commercial enterprise.

Steel IndustryAutomobile IndustryTextile Industry

Four Market Structures

I. Perfect Competition

II. Monopolistic Competition

III. Oligopoly

IV. Monopoly

I. Perfect Competition

Large number of buyers & sellers.

Buyers & sellers deal in identical products.

Each buyer & seller acts independently.

Buyers & sellers are well informed

I. Perfect CompetitionBuyers & sellers are free to enter, conduct, and get out of business.

Each individual firm too small to influence price.

No Advertising

Example: vegetable farming – farmer’s markets.

II. Monopolistic Competition

Large number of buyers & sellers.

Buyers & sellers deal in product differentiation.

Each buyer & seller acts independently.

Buyers & sellers are well informed.

Buyers & sellers are free to enter, conduct, and get out of business.

Monopolistic Competition

Product Differentiation

Non Price Competition

Example: jeans, shoes, sneakers, etc

Oligopoly

Few very large sellers dominate market.

Product may be differentiated.

Sellers act interdependently.

Act together in their pricing behavior.

Compete on a non-price basisExample: Tobacco, Cereal, Soda, etc

Monopoly

One seller of a particular product.

Types of monopoliesNatural

Geographical

Technological

Government