pure competition market structure continuum four market structures
TRANSCRIPT
Pure CompetitionPure Competition
Market Structure ContinuumMarket Structure Continuum
Four Market Structures
Pure MonopolyPure Monopoly
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
Four Market Structures
Monopolistic CompetitionMonopolistic Competition
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
PurePureMonopolyMonopoly
MonopolisticMonopolisticCompetitionCompetition
Four Market Structures
OligopolyOligopoly
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
PurePureMonopolyMonopoly
MonopolisticMonopolisticCompetitionCompetition
Four Market Structures
OligopolyOligopoly
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
PurePureMonopolyMonopoly
MonopolisticMonopolisticCompetitionCompetition
Four Market Structures
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
PurePureMonopolyMonopoly
MonopolisticMonopolisticCompetitionCompetition OligopolyOligopoly
Characteristics of Pure Competition
• very large numbers
• standardized product
• price-takers
• easy entry & exit
Pure Monopoly
Characteristics:
• Single seller
• No close substitutes
• Price-maker
• Blocked entry
Pure Monopoly
• Examples– public utilities
Pure Monopoly
• Examples– public utilities – professional sports teams (Maple Leafs)
Barriers to Entry
• Economies of Scale (Microsoft, aircraft)
• Legal Barriers to Entry: Patents (drugs)& Licenses (CRTC)
• Ownership or Control of Essential Resources
• Pricing & Other Strategic Barriers to Entry
Monopolistic Competition& Oligopoly
Monopolistic CompetitionMonopolistic Competition
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
PurePureMonopolyMonopoly
MonopolisticMonopolisticCompetitionCompetition
Four Market Structures
Characteristics of Monopolistic Competition
• Relatively Large Number of Sellers– Small Market Shares– No Collusion– Independent Actions (little interdependence)
Characteristics of Monopolistic Competition
• Differentiated Products– product attributes (physical, qualitative)– service– location (small convenience stores)– brand names & packaging (Bayer vs. Anacin)– some control over price
Characteristics of Monopolistic Competition
• Relatively Large Number of Sellers
• Differentiated Products
• Easy Entry & Exit
• Advertising
OligopolyOligopoly
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
PurePureMonopolyMonopoly
MonopolisticMonopolisticCompetitionCompetition
Four Market Structures
OligopolyOligopoly
The Characteristics of Oligopoly
• A Few Large Producers• Homogeneous or Differentiated Products • Control Over Price, but Mutual
Interdependence• Entry Barriers
– economies of scale– high capital costs– ownership of raw materials
• Mergers
ECONOMICS IN ACTION And, according to affidavits submitted to a Canadian court, top
executives at Hershey, Mars, and Nestle met secretly in coffee shops, in restaurants, and at conventions to set prices.
The Prisoners’ Dilemma When the decisions of two or more firms significantly affect each others’
profits, they are in a situation of interdependence. The study of behavior in situations of interdependence is known as game
theory. The reward received by a player in a game—such as the profit earned by
an oligopolist—is that player’s payoff.• A payoff matrix shows how the payoff to each of the participants in a
two-player game depends on the actions of both. Such a matrix helps us analyze interdependence.
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The Prisoners’ Dilemma
Don’t confess
Don’t confess
Confess
Confess
Louise
Louise gets 2-year sentence.
Louise gets 5-year sentence.
Thelma gets 20-year sentence.
Thelma gets 5-year sentence.
Louise gets 15-year sentence.
Louise gets 20-year sentence.
Thelma gets 15-year sentence.
Thelma gets 2-year sentence.
Thelm
a
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Four Market Models
LO1
Characteristics of the Four Basic Market Models
CharacteristicPure
CompetitionMonopolistic Competition Oligopoly Monopoly
Number of firms A very large number
Many Few One
Type of product Standardized Differentiated Standardized or differentiated
Unique; no close subs.
Control over price
None Some, but within rather narrow limits
Limited by mutual inter-dependence; considerable with collusion
Considerable
Conditions of entry
Very easy, no obstacles
Relatively easy Significant obstacles
Blocked
Nonprice Competition
None Considerable emphasis on advertising, brand names, trademarks
Typically a great deal, particularly with product differentiation
Mostly public relation advertising
Examples Agriculture Retail trade, dresses, shoes
Steel, auto, farm implements
Local utilities
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