An In-Depth Analysis of Market Structures and Their Competitiveness

This report delves into the intricacies of market structures, examining the characteristics and competitiveness of perfect competition, monopoly, and oligopoly. It elucidates how these structures impact consumer behavior, producer strategies, and government interventions. The report highlights the significance of market structures for various stakeholders, including consumers, producers, and the government, and analyzes the factors that influence the pricing of products and services within different market environments. It provides real-world examples, such as the Indian fish market and the Saudi Arabian oil industry, to illustrate these concepts. The report concludes by emphasizing the importance of market structures in trading activities and advocating for perfect competition as the most desirable structure for fostering fair competition and minimizing consumer exploitation. The analysis underscores the role of market dynamics in shaping economic outcomes and the need to understand these structures for effective economic decision-making.

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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

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to control an industry of interest to them for example provision of electricity services. Another
aspect that can result in a monopoly is an exclusive access of a firm to specific natural resource..
Other factors that can grant a firm the monopolistic powers are the patents or copyright which
bars others from joining the market. Such a case occurred to Pfizer which acquired the patent on
Viagra. A good example is the government of Saudi Arabia exclusive rights to the oil industry
(Gordon 2007).
Oligopoly
An oligopolistic market consist of a few enterprises making up an industry. The group of
firms in this market determines the price of the products under their control in a cartel style. This
kind of market structure is characterized by high barriers to entry just like a monopoly (Fellner
2009).

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The products that are on offer in this market are almost similar and the firms exist in an
interdependent manner due to the market forces in quest for market share. Any action by the
competing firms in relation to price hikes or cuts gets a similar response from the other market
players because of the interdependency.
In the US one of the industry that perfectly represent oligopolies can be identified in the
mass media industry. It has six main players dominating the industry. They include; Walt
Disney, CBS corporation, NBC universal, Time warner and News corporation owned by Rupert
Murdoch (Baye 2005).
Importance of Market Structures
The market structures are important to different stakeholders depending on the structure
that suits them. The importance of the market structures can be explained in light of benefits to
the consumer, producers and the government in the following ways;
Consumer
The consumer is always on the lookout for affordable, value for money product. In a perfectly
competitive market the prices are determined by the market forces of demand and supply. The
prices are low when many players exist in the market and when substitutes are many (Machovec
2011).
Producers
The producer would prefer a monopolistic market because it guarantees maximum returns for
investment. If a firm have exclusive access to market it can set a price that is favorable to it

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regardless of the voice of the consumers. Investors often search for monopolistic chances as this
accords them high profits. Markets that give monopolistic opportunities attract a lot of attention
from the investors.
Government
Governments are interested in the market structures and usually joins the production or supply
sectors when interests of the public are threatened. It can also occur that the government would
seek to be a monopoly in production of some commodities or services to safeguard other national
interests and ward off competition from foreigners.
Conclusion
The market structures are important elements of trading activities. The main structures
are the perfect competition, monopoly and oligopoly. The perfect competition market is
characterized by many players offering almost similar products and consumers have a wide
variety of choices.
The monopoly market has a single producer with no close substitute for its products or
services and the prices are left at the producer’s discretion. The oligopoly market has few players
controlling the market to the disadvantage of consumer’s voice. The market structure attracts the
interest of all the stakeholders in the market including the consumers, producers and the
government since each have vested interests. The most desirable market structure is the perfect
competition because it provides the level playing field for each participant and it reduces the
exploitation on the side of the consumer.

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References
Alexander, K. (2013). Market structures and market abuse. Handbook of Safeguarding
Financial Stability.
Fellner, W. (2009). Competition among the few; oligopoly and similar market structures.
New York, A.A. Knopf.
Baye, M. R. (2005). Oligopoly. Stamford, Conn, JAI Press.
Lee, D., Anthony, V. S., & Skuse, A. (2008). Monopoly. London, Heinemann
Educational.
Gordon, M. J. (2007). The postwar growth in monopoly power. Journal of Post
Keynesian Economics. 8, 3-13.
Khan, A. (2007). Perfect competition. Islamabad, Pakistan Institute of Development
Economics.
Machovec, F. M. (2011). Perfect competition and the transformation of economics.
London, Routledge.
Mas-Colell, A. (2009). On the theory of perfect competition. Frontiers of Research in
Economic Theory : the Nancy L. Schwartz Memorial Lectures, 1938-1997 /
Edited by Donald P. Jacobs, Ehud Kalai, Morton I. Kamien.