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 The structure of a market is a
description of the behaviour of
buyers and sellers in that market.
More precisely, market structure is
about the nature and type of
competition exiting in specific
market.
 Competition depends on the number
of sellers and buyers in the market.
 À

 

 This is abstract situation i.e. has no
existence in real world.
 Why do study perfect competition to
use it as benchmark to investigate
divergence from perfect competition
in specific market.
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 s the one in which both buyers and
sellers believe that their own buying
and selling decisions have no effect
on the market price.
 Examples: farmers selling wheat, or
buying stocks in stock exchange
market.
 
  



 

m. Many buyers and sellers: market dealers
are ¬


  i.e., firms and
consumers must take the price as given.
price--taker: individual firms have no
price
significant control over product price.
Each firm produces such a small fraction
of total output, and increasing or
decreasing its output will have no
influence upon total supply or product
price.
 
  



 

.Homogeneity of the good: all firms
should be producing



product i.e., there is nothing
different that makes consumers
prefer one good to another.
Example: ndustries producing raw
materials or semi-
semi-finished goods
are typically offering uniform
products to buyers
 
  



 


. Freedom of entry and exist from the
market:
- Producers have the choice of entering in
any industry.
- Producers have the choice of selling or
not selling their products.
- No blockage from competitors.
- No government restriction on exist and
entry.
- All competitors should have identical
access to inputs.
 
  



 

Ô. Perfect information or full
knowledge of market situation
- Consumers and producers should
have perfect knowledge about
market prices.
- Market dealers should not be able to
take the advantage of consumers¶ or
producers¶ ignorance about market
prices
 
  



 

. Perfect mobility of factors between
different industries and places:
- No legal, social or economic
movement barriers for input
movements.
- Mobile inputs are labour and capital,
technology.
 
  



 

¦. no transportation cost:
- Transportation cost should not
change the market price.
- Any transport cost should be borne
by the seller.
. None price competition should not
exist: this means competition on the
basis of quality, advertising and sales
promotion should not exist.
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 0raphically:
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n this case one or more of the perfect competition
requirements are violated.
We begin discussing the types of imperfectly competitive
markets by the extreme cases:
 À
  

Gthe case of one single seller for a product)
- The product has no close substitutes.
- Competition is zero in this case.
- Monopolist is the only seller or potential seller of the good
in that industry. He is ¬


 because he controls
total supply of a product.
- the existence of monopoly depends upon the existence of
barriers to entry, such as economic, technological, legal,
etc« must exist to keep new competitors from coming
into the industry.
  
 
. Simple monopoly: this is the case of
single producer for a specific
commodity.
However, the commodity has a
substitute which is not perfect.
  
 

- Monopsony
Monopsony::
- Monopsonist is the only buyer or potential
buyer for the good in the industry.

Ô- Oligopoly:
- n this case commodity has a few
substitutes or there are many buyers but
a few of them are strong enough to set
the market price.
- Price war and retaliation may exist in
oligopolistic market.
  
 
- Monopolistic competition
There are many firms with different products. This
results in producing commodities which are
substitutes for each other. However, they are not
perfect substitutes for consumers.
- All firms will try to differentiate themselves in
terms of quality of the product. However, they
set their prices according to competitor prices.
- Example: soft drinks, cars, mobile phones, etc.

- None
None--price competition is the main feature of the
monopolistic competition Gsuch as competition in
quality, advertising, delivery service, ect).