- Characteristics: Many sellers that sell products that aren't equal to the standards.
- Advantages: Similar but differentiated products, allows for better consumer choices. There is limited control over the prices, so the prices remain stable enough for many consumers to afford, and there are few barriers to enter and exit the market.
- Disadvantages: Due to the non-standardized products, even though the barriers are few to enter and exit the market, new businesses may struggle for a while until their product sells as well as the others.
- Examples: Companies that sell ice cream, clothing, or other products that have non-price competition.
- Characteristics: Few sellers standardize their industry practices, but the product is differentiated for the consumers. If the four largest companies control at least 40% of the market, they are an Oligopoly.
- Advantages: The few sellers can compete against each other more efficiently because they can focus on the few sellers that own a big portion of the market and try to get "head-start profits" or wait to see what the other markets do and try do what they do, except with a few improvements (2).
- Disadvantages: There is some control over prices due to the small amount of sellers, and the barriers to enter and exit the market are many.
- Examples: Cereal companies, Walmart
- Characteristics: Only one seller, the prices are controlled, barriers that keep competition out of the market.
- Advantages: Monopoly gives research of products more power. This can give the company in monopoly time to research the best way to implement a product to improve it and make it less expensive. If it weren't for the patent power, a technological monopoly, some medicines wouldn't have been developed (3).
- Disadvantages: There are no close substitutes to the product being sold in a monopoly. The sellers have great control over the prices and there are very many restrictions on entering and exiting the market.
- Natural Monopoly: Caused by the fact it is inefficient to have more than one company compete. Public utilities such as water companies can't help but become monopolies.
- Geographic Monopoly: Caused by physical isolation or a restricted market. An example could include a grocery store where there are no stores for tens of miles. The person in that store can raise the prices because people don't have a choice but to stop by that grocery store.
- Technological Monopoly: Patented products until the patent expires, such as penicillin.
- Government Monopoly: Electric and Gas companies. The government allocates areas for these companies to function, leaving the people in those areas with no choice but to consume their services if they want electricity and gas in their homes.
1. Holt McDougal Economics