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Forms of Market Structure
Forms of Market Structure

            There are five forms of market structure and they are as follows.

  1. Perfect Competition or Ideal Rivalry market

    2.             A perfectly competitive market is one in which the number of buyers and sellers is very large, all engorged in buying and selling a standardised product without any unnatural precincts and possessing perfect knowledge of market at a time. In the words of Koulsayaiannis, “Perfect competition is a market structure characterised by a complete absence of rivalry among the individual are price takers and in which there is freedom of entry into and exit from industry.”

    Characteristics of Perfect Competition

    1. Large Number of Buyers and Sellers – The first stipulation is that the number of buyers and sellers must be so large that none of them individually is in a position to influence the price and output of the industry as a whole. The demand of individual buyer relative to the total demand is so small that he cannot influence the price of the product by his individual action.

    2. Freedom of Entry or Exit of Firms – The next situation is that the firms must be at liberty to enter or leave the industry. It entails that whenever the industry is earning huge profits, fascinated by these profits some new firms enter the industry. In case of loss being sustained by the industry, some firms leave it.

    3. Standardised Products – Each firm producers and sells a standardised commodity so that no buyer has any preference for the product of any individual seller over others. This is feasible if units of the same commodity manufactured by diverse sellers and ideal surrogates.

    4. Absence of Artificial Restrictions – The consequent stipulation is that there is entire directness in buying and selling of commodities. Sellers and buyers are at liberty to buy and sell.

    5. Perfect Mobility of Commodities – Another requirement of perfect rivalry is the perfect mobility of commodities and factors amidst industries. Commodities are at liberty to shift to those areas where they can bring the highest price.

    6. Perfect knowledge of Market Conditions – This condition implies a close contact amidst buyers and sellers. Traders possess absolute knowledge about the prices at which commodities are being purchased and sold and the prices at which others are prepared to purchase and sell.

  2. Monopoly Market

    3.             Monopoly is defined by Salvatore as “Monopoly is the form of market organisation in which there is a single firm selling a commodity for which there are no close substitutes.”

    There are some characteristics of monopoly such as

    1. There is only one seller

    2. Entire control on the supply of the product is in the hands of monopolist

    3. Under monopoly, a firm itself is an industry; it can be a sole proprietorship, partnership, JSCs etc.

    4. There is no close surrogate of a monopolist’s product. The event of cross elasticity of demand is least possible.

    5. There are restrictions on the entry of the other firms in the area of monopoly product.

  3. Duopoly

    4.             Duopoly is a special case of the theory of oligopoly in which there are only two sellers and they are absolutely independent and no conflicts arise amongst them. A variation in price and productivity of one will affect the other and hence the other bearing loss has to match up with the price of the competitor.

  4. Oligopoly

    5.             Oligopoly is a market stipulation in which there are a few firms selling standardised or varied commodities. It is complex to point out the number of firms in competition among the few. With only a few concerns in the market, the action of one firm is tending to afflict the others. An oligopoly industry produces either a standardised product or assorted products. The former is called pure and perfect oligopoly and the latter is called imperfect or discriminated oligopoly.

    There are some characteristics of Oligopoly.

    1. Interdependence among the sellers in the oligopolistic market. Each oligopolistic firm knows that changes in its price, advertising, product characteristics etc. may lead to counter-moves by competition.

    2. Advertisement outlay is more in the case of oligopolists and consumer services.

    3. Lack of consistency in the size of firms is another feature. Some may be small, others very large. Such a situation is asymmetrical.

    4. Demand Curve is not easy to be traced out in an oligopolistic market.

  5. Monopolistic Competition

    6.             Monopolistic competition denotes to a market condition on where there are many firms selling a varied product. “There is competition which is keen, though not perfect, among many firms making very similar products.” No firm can have any perceptible influence on the price output policies of the other sellers nor can it be influenced much by their actions. Thus monopolistic competition denotes to competition among a large number of seller producing close but not perfect substitutes for each other.

Its features

            There are a number of features. They are as follows. Large number of sellers, Product differentiation, Freedom of Entry and Exit of Firms, Nature of Demand Curve, Independent Behaviour, Product Groups, Selling Costs and non-price competition.

Conclusion

            Monopoly competition has many significant features. However it is not always feasible to become a monopoly competitor. Thus monopolistic competition refers to competition among a large number of sellers producing close but not perfect substitutes for each other.

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