Types of Market Structure - Economics Help

Overview

• Author: Tejvan Pettinger
• Dates: Updated on 2 June 2020 and 28 November 2019

Market Structures

1. Perfect Competition

   • Characteristics: Many firms, freedom of entry, homogeneous products, normal profit.

2. Monopoly

   • Characteristics: One firm dominates, high barriers to entry, potential for supernormal profit.
   • Diagrams: Includes a monopoly diagram.

3. Oligopoly

   • Characteristics: Dominated by a few firms, interdependence of firms, e.g., 5 firm concentration ratio > 50%.
   • Diagrams: Includes an oligopoly diagram.
   • Collusive Behavior: Firms form agreements to increase prices.
   • Models: Kinked demand curve model where prices are stable, and firms compete on non-price factors.

4. Monopolistic Competition

   • Characteristics: Freedom of entry and exit, differentiated products, normal profits likely in the long term.

5. Contestable Markets

   • Characteristics: Freedom of entry and exit, low sunk costs.
   • Theory: Suggests the threat of competition is more important than the number of firms.

6. Duopoly

   • Characteristics: Two firms dominate the market, e.g., Pepsi vs Coca-Cola, Android vs Apple.
   • Position: Falls between monopoly and oligopoly.

Related Topics

• Mergers
• Objectives of Firms
• Bertrand Competition: A form of competitive duopoly.

Additional Resources

• A-Level Revision Guides
• Economics Blog
• Recent Posts: Includes topics like pension affordability, wealth taxes, house prices, UK economic projections, and AI impact.

About the Author

• Tejvan Pettinger: Studied Philosophy, Politics, and Economics (PPE) at LMH, Oxford University.

Notes

• The lecture is comprehensive on market structures, highlighting key differences and characteristics of each type.
• Additional diagrams and models are available for more detailed study.