Each branch has its own market specificity – the
production of different goods, a various industry of producers, the size of
enterprises, the features of technology, the composition and specificity of buyers,
the specifics of competition.
In microeconomics, the most typical market structures are
generalized and the behavior of manufacturing firms is studied, leading to the
receipt of the greatest benefits for them-the receipt of the maximum profit. At
the heart of these generalizations, specific recommendations are improved that
have important applied importance in the choice of the company’s behavior
strategy in specific market conditions.
The object of the analysis of competition is the branch.
For example, a group of competitors producing goods/services and directly
competing with each other. The purpose of the analysis is to identify the
competitive advantages of the firm and the choice of a competition strategy.
There are four main
market structures: perfect competition, monopolistic competition, oligopoly and
Perfect competition indicates a market structure, in
which a plenty number of small companies compete against each other. Moreover, firms
do not have a significant impact on
power of market. Consequently, the manufacture generally
produces the absolute l level of production, which in turn lead to market has many buyers and producers trading identical
products so that each buyer and seller is a price taker.
Perfect competition relies on the following elements:
All small firms are
focused to maximize profits.
The goods which
offered by the different sellers are largely the typical.
There are not specific
preferences between different sellers. It does not matter for the customer from
which firms buy the products.
All firms have free
access and exit to the market.
There is perfect
information and knowledge about homogenous products.
At present, according to Nelson statistics (2017)
3885567619 out of the global population 7519028970 people use the internet.
Approximately 3.9 billion internet users are both producers and consumers. The
above mentioned example demonstrates that the internet is a market, where a
myriads number of consumers/producers operate without any influence on market
power which in turn lead to equal opportunities in this market, exemplifying
one of the features of perfect competition.
Example of perfect competition.
Internet related industries. The
internet has a strong influence on perfect competition market due to the fact
that the internet has made the way of comparison and check prices easily,
quickly and efficiently (perfect information). Consequently, selling any kinds
of good on the internet through a service such as Alibaba, Aliexpress and E-bay
is extremely similar to perfect competition. For instance, it is becoming more
and more popular to use the above mentioned online magazines to compare prices
of any types of product and buy cheaper ones.
Like perfect competition online magazines namely
Alibaba, Aliexpress and E-bay relies on the following elements:
There also a large
number of sellers.
and knowledge. It is easy to compare the prices of goods.
There are no
significant barriers to entry and to exit to the market.
Monopolistic competition is a type of market structure
consisting of many small companies that produce differentiated products and free
entry to the market and exit from the market. The products of these firms are
close, however not completely interchangeable, it means that there
is a difference in price, features, branding and marketing.
differentiating the product, the /monopolistic
competitor reduces price elasticity. Raising the price, the monopolistic
competitor is not deprived of all consumers, as it happens in the conditions of
perfect competition. The market is somewhat narrowed, but there remain those
who steadily prefer the products of only this manufacturer.
Monopolistic competition relies on the following
many sellers and buyers (the market consists of a large number of independent
firms and buyers);
free access to and
exit from the market (no barriers that keep new firms from entering the market
leaving the market);
products offered by competing firms. Moreover, products may differ from one
another in one or a number of properties (for example, in chemical
of sellers and buyers about market conditions;
influence on the
price level, but in a rather narrow framework
One of the most convenient
example for the monopolistic competition is washing powder.
There are quite a few different companies in Poland
such as, Ariel, Tide, Ares, Perwoll, Lenor, Vizir, Perlux, Maxi trat, FF,
Persil, Losk, Surf, Bio Power, Origami and so forth. As a result, for the production of new
varieties of detergent powders it is not required to create a large enterprise.
Therefore, if firms producing powders will receive large economic profits, this
will lead to the inflow of new firms into the industry. New firms will offer
consumers washing powder of new brands, sometimes not much different from those
already produced in a new package, another color or designed for washing
different types of fabrics.
The market of
oligopoly is characterized by the presence on the market of a minimal number of
large sellers, whose goods can be either homogeneous or differentiated. The entrance
to the oligopolistic market is extremely difficult, the entrance barriers are
very high. Control of individual companies over prices is limited. Examples of
oligopoly can serve the automotive market, cellular communication markets,
household appliances, metals. The peculiarity of the oligopoly is that the
decisions of the companies about the prices for the goods and the volumes of
its supply are interdependent. The situation on the market depends heavily on
how companies react when the price of a product changes with one of the market
participants. Two types of reaction are possible: the first is reaction ,when
other oligopolists agree with the new price and set prices for their goods at
the same level (follow the initiator of the price change);the second ignoring
reaction – other oligopolists ignore the price change by the initiating firm
and maintain the previous level of prices for their products. Thus, for the
oligopoly market, a broken demand curve is characteristic.
Features and conditions of oligopoly:
the number of
sellers in the industry: small;
size of firms:
control over the
access to market
barriers to entry
into the industry: high;
competition: non-price competition, very limited price.
Cellular services today are the most profitable and
rapidly growing segment of the telecommunications market in Russia. A small
number of sellers dominate the Russian cellular market, which is one of the
most obvious example for oligopoly. The leading players here are MTS, Megafon,
Beeline, Tele2. A feature of the Russian cellular market is that it is
characterized by a high level of competition. MTS successfully relies on the
price leadership strategy; Megaphone applies the strategy of minimum prices for
services; Beeline relies on a pricing strategy based on individual costs; Tele2
provides the widest range of tariff plans at low prices.
Monopoly occurs when an enterprise produces products
for which there is no substitute. The opposite of perfect competition is a pure
monopoly – a market where only one firm operates, which by virtue of this
circumstance can influence the market equilibrium and market price.
Monopoly – a market structure that meets the following
The release of
goods throughout the industry is controlled by one seller of this product, which
means that the monopolist is the only producer of this good and personifies the
produced by the monopolist is special in its own way (unique) and has no close
completely closed to enter the industry of new firms, therefore in the
conditions of monopoly there is no any competitive struggle.
The most prominent example of a pure monopoly in the
United States is the United States Postal Service (USPS). People have all heard
that the Postal Service is losing money. According to a report published in
2014, the USPS lost a staggering $2 billion dollars in just 3 months, despite
cutbacks in service. With such a glaring need for improved operations, you
might wonder why other businesses haven’t entered the market to compete with
the Post Office for first-class and standard mail delivery. Moreover, it should
be noticed that the Post Office is a government-protected monopoly. The Private
Express Statutes established in 1792 gives the USPS exclusive rights to deliver
letters for a fee, with very few exceptions. Letters that are designated to be ‘extremely
urgent’ may be delivered by other providers but even then, the Post Office is
allowed to set the minimum price that the private competition must charge. This
is an example of a legal barrier to entering the market.
In conclusion, there are four
main kinds of market structure: perfect competition, monopolistic competition, oligopoly
and monopoly. The perfect competition illustrates a market structure, where myriads
of small firms contend with each other, while monopolistic competition also has
a lot of small firms, which compete with each other with the help of varied products.
Besides, Oligopoly demonstrates a marker structure with small number of firms. Monopoly
is the opposite of perfect competition, where only one firm controls all