Discussion of Market Structures

The modern market is characterized by an extensive and multi-level structure. It is a collection of individual market elements that interact with each other. The market covers elements directly related to ensuring the continuity of the reproduction process, its integrity and efficiency. This predetermines the different structure of the market, the variety of its types. The structure of the market is determined by the subjects and objects of market relations. The main subjects of the market economy are: household (population), entrepreneurial sector (entrepreneurs), various forms of business, public and international sectors are subjects of market relations are all market participants – individuals and legal entities. The objects of market relations can be products of labor (means of production, consumer goods and services, scientific and technical developments and information), labor, money, currency, securities (stocks, bonds, bills of exchange), the earth and its subsoil are, objects of market relationship is a collection of goods and services. Markets are also distinguished by the degree of independence of sellers and buyers.

Perfect, free or pure competition is an economic model, an idealized state of the market, where individual buyers and sellers cannot influence the price, but form it with their input of supply and demand. for example wheat, copper, securities. No single buyer or seller has a large effect on the level of the current market prices of the product (Reynolds, 2005). The seller is unable to request a price higher than the market because buyers are free to purchase any quantity of goods they need at this market price. Sellers will not ask for the price below the market because they can sell everything they need at the current market price. Sellers in these markets do not spend much time developing marketing strategies, because as long as the market remains a market of pure competition, the role of marketing research, product development activities, pricing policies, advertising, sales promotion, and other activities is minimal. Standardized (homogeneous) A product is a product that does not differ in quality from different manufacturers. Firms produce the same quality, not because they do not make any effort to improve the product, but because such is the product itself. In its pure form, this market practically does not occur in the economy. However, such markets as the agricultural market, the securities market, the currency market have signs of a market of pure competition.

Graph 1. The curve of demand for goods on pure competition market

Monopoly assumes that one enterprise is the only manufacturer of products that has no analogs. At the same time, buyers do not have a choice: they are forced to acquire the products of a monopolistic enterprise. The branches of the public utilities are usually considered to be branches of pure monopoly: heat, water, gas, electricity. Practice shows that many market structures are very close to the situation of a pure monopoly than to any other market model.

A pure monopoly is a market organization where there is only one seller of goods on it, and there is no close substitute for this product in other industries (Bresnahan & Reiss, 1990). Along with oligopoly and monopolistic competition, monopoly is an example of imperfect competition. Pure monopoly arises usually where there are no alternatives, no close substitutes, the product being produced is to some extent unique. The main characteristics of pure monopoly are the following: one seller (there is only one company in the market that influences prices by adjusting the supply); product uniqueness (there are no identical types of products on the market); possession of the main types of raw materials (controlling the market for raw materials in its industry, the monopolist company does not allow the emergence of new producers).

Graph 2. Comparison of pure competition and pure monopoly markets

Oligopoly is a market structure when the number of firms in the industry is small and all of them are interdependent when conducting a pricing policy. The main reasons for the formation of oligopoly largely coincide with the reasons for the existence of a pure monopoly. Under the conditions of oligopoly, each of the few large firms knows that if it lowers the price to increase sales, other firms will have to do the same to maintain their market share. As a result, each company, other things being equal, will have the same share of sales at lower profits. Therefore, price competition is unprofitable for all firms operating in conditions of oligopoly. To explain this situation, a model of a broken curve of demand for oligopolistic products is used. This model is built on the assumption that there are several large independent firms operating in the industry that have approximately the same market share of a certain type of product and do not implement an agreed pricing policy. Suppose that at present the price of the products of one of these firms is equal to Po, and the volume of output is Qo (point O). It should be explained how the schedule of demand for the products of this oligopolist will change with a decrease and increase in the price of their products, based on the behavior of other firms.

Graph 3. Curves of demand for goods on oligopoly market

Monopolistic competition is the type of market structure, consisting of many small firms that produce differentiated products, and is characterized by free entry into the market and exit from the market (Kumar & Satterthwaite, 1983). The products of these firms are close, but not completely interchangeable, i.e. Each of the many small firms produces a product that is somewhat different from the products of its competitors.

Graph 4. Curves of demand for goods on monopolistic competition market

Through product differentiation, a monopolistic competitor reduces price elasticity of demand. Raising the price, the monopolistic competitor does not lose all consumers, as it happens in conditions of perfect competition. The market will narrow somewhat, but there will remain those who consistently prefer products only from this manufacturer.

References

Bresnahan, T., & Reiss, P. (1990). Entry in Monopoly Market. Retrieved from https://www.researchgate.net/publication/4995420_Entry_in_Monopoly_Market

Kumar, K., & Satterthwaite, M. (1983). Monopolistic Competition. Retrieved from https://www.researchgate.net/publication/5202392_Monopolistic_Competition

Reynolds, R. (2005). Pure Competition. Retrieved from https://cobe.boisestate.edu/lreynol/WEB/PDF/short_12_pure_comp.pdf

The terms offer and acceptance. (2016, May 17). Retrieved from

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"The terms offer and acceptance." freeessays.club, 17 May 2016.

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"The terms offer and acceptance." freeessays.club, 17 May 2016

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"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]
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