Market structures are models of competition between businesses which operate in the same industry.
Types of Market Structures
A market structure where one entity dominates the market and has control over prices. Monopolies may be supported by the government, possess innovative technology, be confined to geographical areas, or may just be large and influential.
The advantage of a monopoly is that the company exercises almost complete control of the market. It controls prices and earns large profits due to there being no competition.
The disadvantages of a monopoly are the difficulty to enter the market and the ability for the company to charge higher prices for consumers.
Examples of monopolies are cable companies (geographical monopolies) and the United States Postal Service (government monopoly).
A market structure where "rule by the few" is emphasized. The market is controlled by a few large companies.
The advantages of an oligopoly are the power that the companies have and the ability to compete. Oligopolies have standardized products and can compete to lower prices if need be.
The disadvantages of an oligopoly are similar to those of a monopoly. It is very hard to enter into a market controlled by an oligopoly since those companies are already very successful and the costs are very high since you would be competing with other large corporations.
Examples of oligopolies are the soft drink market (Coca-Cola against Pepsi) and the cell phone market (Microsoft, Google, and Apple).
Monopolistic Competition is similar to an oligopoly in that it involves a few large companies. However, it is different since the products sold are similar, but they are differentiated. Monopolistic competition can be summarized as similar companies trying to make the best version of a product.
The advantages of monopolistic competition are that consumers benefit from price competition and producers benefit from more affordability to open a business in this market.
The disadvantages of monopolistic competition are mostly against the companies since they do not have as much control over prices since there are more sellers. It is also harder for them to make a profit because of the amount of competitors they have to surpass.
An example of monopolistic competition would be the fast food market. Many fast food corporations sell similar products, such as hamburgers, chicken sandwiches, and fries, but they are differentiated in order to be unique.