Hence, individuals will be having limited contribution in the market. Large number of firms leads to competition in the market. 2. Product Differentiation: Each firm is in a position to exercise some degree of monopoly (in spite of large number of sellers) through product differentiation. Product differentiation refers to differentiating the products on the basis of brand, size, color, shape, etc.
Monopolists are able to maximize their profits by selling a quantity of their good where marginal costs is equal to marginal revenue, but set a price where this equilibrium meets the demand curve. However, a monopolist isn't desirable for consumers as they create a deadweight loss. (Shown below) The third type of market structure is an oligopoly. This type of market can be seen as being imperfect (where as a monopoly and competitive markets can be seen as being perfect). There are only a few sellers who dominate this type of market, all of which sell similar goods- an example being supermarkets, which are dominated by Tesco, Sainsburys and ASDA.
An oligopoly is a market with a small number of sellers. • Oligopoly requires strategic thinking, unlike perfect competition, monopoly and monopolistic competition. Characteristics of an oligopoly There is no single theory of prices and production in the oligopoly market. If the price war breaks out, oligopolists can produce and the price as well as a highly competitive industry and would sometimes act as a pure monopoly. An oligopoly generally has the following characteristics: • Product Branding: Every company in the market selling a branded product.
However, there are threats to this competitive advantage. Wal-Mart and other stores have experimented with smaller locations throughout the country. Current threats include; increased rivalry within the industry, copying the Trader Joe’s strategic model, lack of technology/online presence and substitute brands. Tesco was unsuccessful in the United States that does not mean that other industry competition will not try and imitate or copy the Trader Joe’s concept. Other threats include new competition, local co-ops, e-commerce (Amazon) and a shift in consumer preference.
These are the products produced by competing monopolists that have separate identity, brand, logos, patents, quality and such other product features. Product differentiation does not mean that goods are completely different. Rather it means that products are different in some ways, but not altogether so. These imaginary differences are created through advertising, marketing, packaging and the use of trademarks and brand names. Existence of many firms Under monopolistic competition, there is fairly large number of sellers, let say 25 to 70.
Buyer Power. FMCG producers like Energizer have weak buyer power as customers are disintegrated and have slight impact on product or price. But if we look at the buyers as retailers or distributors rather than persons, then these firms face very strong buyer power. Retailers like Auchan and Azbuka Vkusa are able to negotiate for pricing with companies like Energizer because they purchase and sell much of Energizer products. Outcome: Strong buyer power from retailers and
Monopoly is an industry that composed of a single seller of a product with no close substitutes and with high barriers to entry. For example, Microsoft Corporation Characteristics of monopoly Single seller the firm which is also known as the monopolist and the industry are one and the same. Price maker the firm is able to choose a profit maximizing price from a range of prices imposed by market conditions and competition. No close substitute for the product this is because there is no close substitutes for its product, the monopoly faces a little competition. Barriers to entry for new firms It is legal or natural constraints that protect a firm from potential competitors.
Market Structure: The interconnected characteristics of a market, such as the number and relative strength of buyers and sellers and degree of collusion among them, level and forms of competition, extent of product differentiation, and ease of entry into and exit from the market Four basic types of market structure are (1) Perfect competition: many buyers and sellers, none being able to influence prices. (2) Oligopoly: several large sellers who have some control over the prices. (3) Monopoly: single seller with considerable control over supply and prices. Monopolistic Competition: Monopolistic Competition' Characterizes an industry in which many firms offer products or services that are similar, but not perfect substitutes. Barriers to entry
These products hence cannot substitute each other. In the monopolistic competition, the firm ignores their prices impact on the other firm's product prices while taking the charged price by the rivals just like it's given. In a coercive government, a monopolistic competition falls under a government granted monopoly. In this case, the firm maintains spare capacity. Examples of monopolistic competition include clothing's, shoes, cereals and restaurants and all the service industries in the different
Question No.1: What are the characteristics of a perfectly competitive market? The perfect competitive market is a description of a market where no participants are large enough to have the market power to set the price of a homogeneous product; this is because the conditions set for perfect competition are strictly applied. Realistically speaking, there are very few, if any, perfectly competitive markets. The closes comparison would be the buyers and sellers in some auction markets or for financial assets, which approximate the concept. The perfect competitive market serves as a natural benchmark against which to contrast other markets.