One of the most common market structures is monopolistic competition
where many sellers offer similar, but not standardized, products.
- Many Sellers and Many Buyers where sellers act independently.
- Similar but Differentiated Products where the products look similar but are in actuality different.
-Limited Control of Prices
-Freedom to Enter or Exit the Market, there are no huge barriers to entry
- There are no significant barriers to entry, so you can enter and exit the market as you please.
- Differentiation creates diversity in the market so you have more options.
- The competition doesn't change the prices and they remain at a fair price.
- Substitutes leave room for customers to choose one over the other.
- Restaurants, Hotels, Pubs, Consumer Services
A market structure in which only a few sellers offer a similar product, is less competitive than monopolistic competition.
-Few Sellers and Many Buyers
-Standardized or Differentiated Products
- More Control of Prices
- Little Freedom to Enter or Exit Market
-There is more control over prices and ability to make more profit.
- The many buyers compared to the few sellers give producers a better chance at making a profit.
- Smaller businesses have to compete with bigger business and struggle.
- Start up costs can be very high.
-Automobile Industry, Software Industry, Airlines
The least competitive market structure where only one seller sells a product for which there are no close substitutes.
-Only one seller
-Control of Prices
-Restricted, Regulated Market
-Little to no competition
-Complete control of business
-Control of prices could impact consumers
-Barrier to entry
-No close substitutes
- Diamond Businesses
Natural Monopoly: A market situation in which the costs of production are lowest when only one firm provides output. Ex. Electricity, Water
Government Monopoly: A monopoly that exists because the government either owns and runs the business or authorizes only one producer. Ex. Postal Service
Technological Monopoly: A monopoly that exists because the firm controls a manufacturing method, an invention, or a type of technology. Ex. Polaroid Cameras
Geographic Monopoly: A monopoly that exists because there are no other producers or sellers within a certain region. Ex. Professional Sports