Market Structures Overview (not done)
Perfect (like me) Market
There are five characteristics that define perfect competition.
1. Numerous buyers and sellers - No seller or buyer has control over price.
2. Standardized product - Sellers offer a standardized product, or a product that customers see as the exact same from every seller.
3. Freedom to enter and exit markets - No government restrictions prevent businesses from entering or exiting the market.
4. Independent buyers and sellers - Buyers and sellers can't band together to influence prices.
5. Well-informed buyers and sellers - Buyers and sellers are well informed about market conditions and make decisions based on that.
The advantage of this market is that products are always selling at market price. The disadvantage is that no market is actually really a perfect market, there are always complications that make it an imperfect market.
Many fruit markets are an example of a perfect market, prices are always the same because no two of the same fruit are different enough to pay extra for, and anyone can decide to enter and leave the market.
A monopoly is a market in which one seller dominates the market. There are three characteristic to a monopoly.
1. There is Only One Seller - Only one business has control of the industry because they control the supply of the product and there are near substitutes available.
2. A Restricted, Regulated Market - Government intervention allows for only one producer to enter the market.
3. Control of Price - The monopoly is able to control the price of their product freely because there is no competition.
There are four types of monopolies, a natural monopoly, government monopoly, technological monopoly, and a geographic monopoly.
Natural monopoly - This is a monopoly that naturally decreases in efficiency as more producers enter the market, so there is no reason to have more than one producer. Waste management systems is an example because it not profitable to compete in that market.
Government monopoly - These are monopolies made by the government because no one else can. The military is an example of this, there aren't any private military.
Technological monopoly - This monopoly is made through patents of revolutionary technology. Intel's hyper-threading technology is an example of this. Since they patent hyper-threading, only they can produce that technology that gives massive increase in performance to its processors and allows Intel to own the highest performing CPUs in the market.
Geographic monopoly - This is a monopoly that exist because there are no substitutes in the area. There is a single beach bar in Miami that has the privilege of being the only beach bar because it already existed before the ban on beach bars was implemented. This monopoly's uniqueness in location allows them to be more free with their price.
Characteristics that make an oligopoly include: Few sellers and many buyers, standardized or differentiated products, more control of prices, and little freedom to enter or exit the market.
Advantages include: Sellers have enough market share that decisions made by them affect the whole market.
Disadvantages include: The costs required to enter the market are high.
Examples: NVidia and AMD dominate the GPU market.