Different Types of Market Structures
First off, what is a Market Structure? Well, a Market Structure is an economic model that helps economists examine the nature and degree of competition among businesses in the same market or industry.
What is it? Monopolistic Competition is when producers have a standardized product and the consumer is not limited to one standardized product.
Cons: The downside to this, though, is there is no close substitute because these standards tend to vary. Say if you want an iPhone. You may not be able to afford that iPhone and since there are such varying standards and no really cheap but close substitute, you may have to settle with a jitterbug.
Pros:The upside to this is that if you are going to buy a product, you are at least going to have standardized products from that one company that you buy. Also, goods should be relatively cheap due to the number of competitors.
-Apple and Samsung
-GM and Ford
-Mars and Hershey
-Coke and Pepsi
What is it? An Oligopoly is when a market or industry is controlled by a very small group of sellers.
Cons: Oligopolies are prone to reducing competition and price setting. This in turn jacks up prices for the consumers. When firms within an oligopoly stay in the market long enough, the barriers to enter the market for smaller firms and other businesses becomes much harder because these firms have the financial reserves to pump out market research, advertising, creating customer loyalty, etc.
Pros: Oligopolies still allow for SOME competition (however little it may be). Prices within the oligopolies are also more stable (they may be higher, but won't really fluctuate because of the amount of control).
- UPS, USPS and FedEx
- US Mobile Phone Carriers (AT&T, Sprint, T-Mobile, Verizon)
- US Oil Companies (Exxon Mobile and Chevron)
- US Film Studios (Sony, MGM, Lionsgate, Comcast, Time Warner, News Corporation and Viacom)
What is it? It definitely is not just a board game. Investopedia defines a monopoly as a situation in which a single company or group owns all or nearly all of the market for a given type of product or service. By definition, monopoly is characterized by an absence of competition.
Cons: Since a monopoly is when a single company or group owns all of the market for a given product, this automatically means there is no competition. No competition means that the monopoly in charge controls price setting, which can be bad for the consumer because of instances of price gouging. Also, since there is a lack of competition, there is no close substitute, if any at all, because of the total control by that one firm or group of companies.
Pros: Monopolies are the only ones in control of a market, this means that the product they are going to deliver is going to be highly standardized, prices are going to be extremely stable, and the firm is going to be efficient (they are that huge for a reason).
- US Postal Services (for mail...parcel delivery is more of an oligopoly)
- Utility Companies within an area (like Duke Energy)
Monopolies are not really as rampant as they were before the Sherman Antitrust Acts were set into place. These acts gave the ability to take over monopolies to ensure the continuation of a free market....TRUST BUSTING!!!!!!!
What are some different monopolies?
Within the monopoly category, you have monopoly subcategories...And no, this doesnt mean the different types of monopolies you can buy at Books A Million or Barnes and Nobles...You have the Government Monopolies, Natural Monopolies, Geographic Monopolies, and Technological Monopolies.
Government Monopolies are monopolies that are taken over by the government to ensure the protection of the free market...OR monopolies in which the government controls all facets of production and/or distribution.
-The Postal Service
Natural Monopolies are monopolies that tend to happen simply because it is what the consumer wants. These aren't necessarily a bad thing because natural monopolies cater to the consumer's needs (in most cases) at a relatively cheap cost.
Example: Utility Companies in general.
Geographic Monopolies are monopolies that occur within an area just because there is no close substitute...Literally, there is nothing physically close to the store or product location...
Example: A Walmart out in the middle of a small town or in the hills or mountains.
Technological Monopolies are monopolies that occur when a single firm controls manufacturing methods necessary to produce a certain product, or has exclusive rights over the technology used to manufacture it.
Example: Intel Technologies