Competitiveness of market structure PDF

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COMPETITIVENESS OF MARKET STRUCTURES
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COMPETITIVENESS OF MARKET STRUCTURES
The world of trade has different stakeholders who include the producer, the consumer and
the government. The interaction field for these entities is the market which has its own
configuration depending on the nature prevailing known as the market structure. Market
structure can be described as the features of the market. These could be the competitive or
organizational characteristics of the market, the number of enterprises that produce similar
products in the market among other facets (Alexander 2013). The major areas of focus for
economists in assessing the market structure are the mode of pricing and the nature of
competition in that particular market. This is because it influences the behavior of the particular
firms present in the market and the pricing of products or services in the market. This paper
examines the reasons as to why some markets are more competitive than others in the light of
market structures.
Types of Market Structures
There are three main types of market structures. These are perfect competition, monopoly, and
oligopoly.
Perfect Competition
The market has two extremes systems of market structure. These are the perfect competitions
and monopoly. When the market has many buyers and sellers with products being of similar
nature and availability of many substitutes, then it is referred to as perfect competition (Khan
2007). The barriers to entry in this kind of market structure are few and the prices are determined
by the mechanism of demand and supply. The producers therefore do not determine the prices in

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form of increases, since any such attempt will cause the consumers to switch to other producers
in the market. This has impacts on the profits and market share of such a firm.
An example of perfect competition is the Indian fish market. The sellers of fish operate under
one market stand and the buyers come in to buy the product without any persuasive influence.
The sellers are not restricted by anybody from joining the fray.
Another perfect competition market structure is seen in the developing world food stuff street
vendors. There is no significant variation in the food stuff on offer and the consumers are well
informed about the product they want to buy (Mas-Colell 2009).
Monopoly
.A monopoly defines a market structure that has only one seller or producer of a product. This
gives one business entity the status of being the industry. In this kind of market, the barriers to
entry are high as a result of high cost of entry in terms of social, economic or political barriers
(Lee et al 2008). An instance that can occasion a monopoly can be a case of a government plan