Analyzing Market Structures: Monopoly, Oligopoly, and Competition

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Assessment item 4 Assignment 4
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Table of Contents
Table of Contents
Market structures.............................................................................................................................3
Monopoly.........................................................................................................................................4
Oligopoly-........................................................................................................................................4
Monopolistic Competition...............................................................................................................5
Competition-....................................................................................................................................5
ISSUES IN THE MARKET............................................................................................................7
References......................................................................................................................................10
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Market structures are defined as the production of number of goods and services that is
produced by the companies in the market. The market structure also defines the market to be as
organizational or competitive. Thus, the market structure is determined according to the
competition prevailing in the market (Economicsonline, 2019).
Generally market is referred to a place where the seller sells its products, goods and services to
the buyers.In economics, the market is defined as a place where the buyers and seller meet at a
place and perform the marketing activities.
Following are some of the major determinants of market structure-
 Operating number of sellers in the market.
 Total number of consumer in the market.
 Nature of the goods and services which are provided by the firms
 Ratio of the company that provides the maximum amount of shares which are there with
the company.
 Barriers in the market. Entry and exit behaviour in a particular market.
 Economies of scale which defines the efficiency of the firm on producing the goods and
services at a lower cost.
 Sunk cost which defines the amount that has been spent by the company in business
operations.
 Vertical integration which combines the factors of production and distribution which are
held by the company.
 Defining the differentiation of the services provided by the company in comparison with
the other countries.
 The change in customer behaviour with request to the change in the market behaviour
and conditions(Economicsonline, 2019).
There are four types of market-
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Source (Businessjargons, 2019)
Monopoly-It is a market where one seller provides only one product or service to only one seller
in the market. Also, there is a condition that the buyer cannot substitute the products with some
other company. This creates a monopoly situation. There are many companies in the market
which are monopolies. Monopoly market forces the buyer to use only one product in the market
which is provided by the seller.
Oligopoly- Oligopoly is the situation where few companies dominate in the market. The market
structured is shared between few firms. In this market structure, there are few companies that
dominate but it is also possible that some of the small companies also operate in the market. An
oligopoly market produces two types of product-
Homogeneous product- The companies that are producing homogeneous products are known as
Perfect or Pure Oligopoly.Examples of such types of products are- Zinc, Copper, Aluminium and
Iron, etc.Homogeneous products are those products which cannot be differentiated by any other
company or competition. The products are same which are produced by different
companies(Economicsonline, 2019).
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Heterogeneous Product: Heterogeneous products are those which are produced and sold by
different companies in the market. These products can vary from organization to organization.
The products can be differentiated in terms of features, price, quality, quantity and many
more.This type of market is known as the Imperfect or Differentiated market. Examples of these
products are- soaps, mobiles, television, refrigerators and detergents(Economicsonline, 2019).
Source (Cliffsnotes, 2019)
Monopolistic Competition-monopolistic competition is defined as the market where different
buyers sell different products but are not the substitute of it. The demand curve in this market
structure is inelastic. The sellers and buyers of the company have the freedom to enter and exit
the market anytime they want. The firms are able to make normal profits in the long run and
supernormal profits in the short run. Some might confuse monopoly with monopolistic
competition but they both are different market scenario(Economicsonline, 2019).
Competition-It is a type of market where different companies compete with each other by
selling their goods and services in the market. This competition is practised in order to satisfy the
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needs and wants of the consumers in the market. The buyers and the sellers both cannot judge
how the market operates. With the change in the market trends, the companies produce new
goods and services for the consumer. Whichever company will be able to gain maximum amount
of consumer satisfaction will earn more satisfaction and trust for the company(Economicsonline,
2019).
Source (Businessjargons, 2019)
Rod Sims, the Chairman of Australian Competition and Consumer Commission said that the
Australian finance sector is ‘a cosy banking oligopoly’ (Eyers, 2016).ACCC also gave warning
to the banks about the rapid growth in the business sector. Rod Sims said this statement in the
panel at ASIC (Australian Security and Investments Commission). Rod Sins mentioned the
growing market share and bank profits in the recent years have showed that the market has
increased and competitive is also increasing. After the global financial crisis, all the bank assets
increased from 65% to approximately 78% (Eyers, 2016). Rod Sins mentioned the statistics for
the year 2014 (Eyers, 2016).
He mentioned the structure of the market to be as oligopoly because there are various
competitive companies that are there in the market. Sins added that after analysing the market
and the competitors, the competition didn’t look bad.Talking about the statistics, the profits have
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gradually increased. There are only four major banks and a lot of competitors. Apart from the
competition the financial sector have increased from last 10 to 20 years (Eyers, 2016). After
looking at the market, the first thing that comes in the mind is that the market is not competitive
but it is a bit cosy.
Sims told the media to take action the ANZ banking group that alleged manipulated the bill swap
rate. Considering the happening Sims made the statement again of market being a bit cosy rather
than competitive.
During the media interaction with Fairfax Media, Sims told that the ASIC has taken some actions
against the ANZ banking group and investigating about each and every word. After the
discussion with the media, ASIC and ACCC confirmed that the ASIC will help in the regulation
and implementation of the action (Eyers, 2016).
The Financial System Inquiry managed by David Murray mentioned that the growing of the
some of the banks in the market will lessen the competition. David focused that this needs to be
monitored proactively (Memić, 2015). David also mentioned some of the banks that are grown in
the recent years. He said that the wealth management platforms are growing bigger. AMP is
alone holding 80% of primary planner relationships. Murray also mentioned that the main
concentration about the wealth management focused on securing the channels of distribution and
also improving the product features (Memić, 2015).
ISSUES IN THE MARKET
From the above mentioned statement made by Rod Sins, it was clear that the banking sector was
focused on the 4 major banks which grew in the market rapidly. Rod Sins also mentions that the
finance is a bot cosy because the banking sectors are growing in the market rapidly. The market
is not competitive as it was expected. Sins mentioned that the market is not competitive but is a
bit cosy. There are four major banks in the country and the growthfor all the banks have
increased gradually from 67 to 78% in the market.Sins mentioned the market to be as oligopoly.
Oligopoly market is defined as the market structure where there are number of buyers and
sellers. The seller produces the products, goods and services for the buyer and tries to achieve
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maximum number of consumers towards their company. The competition tends to be higher in
comparison with the other market structures. There are some issues also in the oligopoly market:
1. There are number of sellers and buyers in the market.This is because oligopoly market
offers large number of firms to come into the market, compete with the other markets and
try to gather as many as consumers by offering the services. Sometimes, it happens that
different companies come with some identical products. This becomes an issue for the
company and the customer (Ayres, 2017). The customer gets confused about the products
and starts comparing about the product. Sometimes, the customer also leaves the products
and buys some other products. Examples of these identical products are petrol, steel, iron,
copper, aluminium (Ayres, 2017).
2. Some of the new companies which want to enter the oligopoly market to sell their
products, goods and services. But there are certain barriers in the entry of the market. The
major barriers in the entry of the new companies are patents and copyrights, ownership,
government restrictions and expensive start-up. Because of these barriers, the firms
cannot enter into the market for more business.If a country seeks to enter in the market, it
has to be more powerful and should be strong enough to attract the consumers for the
stability in the market(Ayres, 2017).
3. The firms that are dependent on some other companies cannot act independently on some
other companies. This also becomes an issue for an interdependent company to act
independently in the market.
For example- if a petrol company tries to lower the price of petrol for the consumer in
order to fight with the competitors, it will happen that the competitors will reduce their
price also(Ayres, 2017).
4. The major issue in the oligopoly market is that it offers less choice to the consumer.
There are so many companies in the market, but the fewer are available for operating in
the oligopoly market. This makes the consumer to choose from fewer companies.
Sometimes, there are companies that do not satisfy the needs and wants of the customer,
then for that no longer options are available for them. This way the consumer goes for
those products that satisfy their needs partially(Ayres, 2017).
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Above mentioned are all the issues in the oligopoly market. Following are the solution to resolve
the problems in the oligopoly market-
1. Solution: In order to eliminate the confusion produced among customers due to new
identical products developed by different companies, there must be some advertisement,
practical results and reviews shared by the company so that customers can choose those
products on the basis of information, reviews and results shared by the company. It will
help customers to take better decision and continue to use different products of same
company instead of changing to products of other company. Also, visual effects
developed over the description of different product by company will also reduce the
confusion among customers while selecting different products produced by various
companies within the market of oligopoly.
2. Solution: Modifications and development of equal opportunities for different companies
so that any organization or the company who wants to enter oligopoly market for selling
their products, goods and services. It can be done by reducing the barriers and
development of new structure for the investors and new companies so that different
companies can join the market in easy manner and sell their products and goods to the
consumers without much effort. Modification under existing rules and regulation to
attract large number of companies to sell their products and services over the competitive
market of oligopoly will play significant role for new companies to join the oligopoly
market.
3. Solution: Development of independent platform and structure for those companies who
are dependent over other companies or the organization so that they can join oligopoly
market independently and sell their products without difficulties. To provide
opportunities for different dependent companies to work smoothly within the oligopoly
market in the same manner as other companies are working
4. Solution: Development of new market strategy in order to provide huge amount if
choices for the customers as well as companies involved within oligopoly market. It will
increase the operations of companies working within oligopoly market resulting in
generation of various new opportunities and choices of products available for the
customers.
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References
 Ayres, C. (2017). 10 Pros and Cons of Oligopoly [Online].Greengarage.Available at-
https://greengarageblog.org/10-pros-and-cons-of-oligopoly [Accessed on 28th August,
2019].
 Business jargons, (2019). Market Structure. Business jargons.[Online].Available at-
https://businessjargons.com/market-structure.html [Accessed on 29th August, 2019].
 Cliffsnotes, (2019).Kinked Demand Theory of Oligopoly [Online].Cliffsnotes.Available
at- https://www.cliffsnotes.com/study-guides/economics/monopolistic-competition-and-
oligopoly/kinked-demand-theory-of-oligopoly [Accessed on 29th August, 2019].
 Economicsonline.(2019). Market Structures.[Online].Economicsonline.Available at-
https://www.economicsonline.co.uk/Business_economics/Competition_and_market_struc
tures.html [Accessed on 28th August, 2019].
 Eyers, J. (2016).ACCC warns 'cosy' banks it is concerned about competition.
[Online].SMH.Available at-
https://www.smh.com.au/business/banking-and-finance/accc-warns-cosy-banks-it-is-
concerned-about-competition-20160322-gnojod.html [Accessed on 28th August, 2019].
 Memić, D. (2015). Banking Competition and Efficiency: Empirical Analysis on the
Bosnia and Herzegovina Using Panzar-Rosse Model. Business Systems Research6(1). pp.
72-92.
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