asad.mazher@yahoo.

com

Market structure :
In economics, market structure (also known as the number of firms producing
identical products).

Two Basic Types of Market Structure are:

Perfect Market
Imperfect Market

PERFECT MARKET:

In Economics a perfect market is defined by several conditions, collectively called

Perfect competition. Among these conditions are

Free entry and exit to industry

Homogenous product – identical so no consumer preference

Large number of buyers and sellers – no individual seller can influence

price

Sellers are price takers – have to accept the market price

Perfect information available to buyers and sellers

Examples of perfect competition:

Financial markets – stock exchange, currency markets, bond markets?

Agriculture?

IMPERFECT MARKET :

In Economics a Imperfect market is defined by several conditions, collectively called

Imperfect competition. Among these conditions are

Many buyers and sellers

Products differentiated
 asad.mazher@yahoo.com

Relatively free entry and exit

Each firm may have a tiny ‘monopoly’ because of the

differentiation of their product

Firm has some control over price

Examples

Restaurants, professions – solicitors, etc., building firms – plasterers,

plumbers, etc.

Imperfect market types are

Monopoly
Oligopoly
Duopoly

Monopoly
Monopoly market situation where a single seller exists and has complete control over an
industry

EXAMPLE: SSGC, KESC, PAKISTAN RAILWAY,KW&SB

OR
A situation in which a single company owns all or nearly all of the market for a given
type of product or service. This would happen in the case that there is a barrier to entry
into the industry that allows the single company to operate without competition (for
example, vast economies of scale, barriers to entry, or governmental regulation). In such
an industry structure, the producer will often produce a volume that is less than the
amount which would maximize social welfare.

Pure monopoly – industry is the firm!

Actual monopoly – where firm has >25% market share
Natural Monopoly – high fixed costs – gas, electricity, water, telecommunications, and
rail

Oligopoly
 asad.mazher@yahoo.com

In Economics a oligopoly market is defined by several conditions,

collectively called oligopoly competition. Among these conditions are

Industry dominated by small number of large firms

Many firms may make up the industry
High barriers to entry
Products could be highly differentiated – branding or homogenous
Non–price competition
Price stability within the market - kinked demand curve?
Potential for collusion?
Abnormal profits
High degree of interdependence between firms
OR
A market dominated by a small number of participants who are able to
collectively exert control over supply and market prices.

Examples of oligopolistic structures:

Supermarkets
Banking industry
Chemicals
Oil
Medicinal drugs
Broadcasting
Cements
Automobiles
DUOPOLY
A situation in which two companies own all or nearly all of the market for a given type of
product or service.
OR

In a duopoly the market is controlled by two dominant firms. An example of duopoly is

the global aircraft market, where the two dominant firms are AIRBUS & BOEING.
asad.mazher@yahoo.com