Introduction
Perfect competition is a very rare type of market and so competitive that it negates the impact any one buyer or seller could have on the market price. The products or services sold are exactly the same and are all the same price. Firms earn only a normal profit and in the event firms started to earn more than that, other firms will enter the market and drive the price level down until only a normal profit could be made. Even the technology used is the same throughout all the companies.
Monopoly
Monopoly is a sole player and a single monopoly is seen as one organization that holds 100% of a certain market share. A monopoly produces less at a higher price and decides the price of its good/service by calculating the quantity of output so that its marginal revenue would equal its marginal cost. Afterwards the monopoly would then sell its good/service at whatever price would allow it to sell exactly that quantity.
In practice monopolies are not absolute; they are usually constrained by competing. A case of this occurs when a single firm dominates a certain market, but has no pricing power because it is in a Contestable Market, “a market in which an inefficient firm, or one earning excess profits, is likely to be driven out by a more efficient or less profitable rival.” (www.economist.com)
Oligopoly
Oligopoly is when a few select firms dominate a select market. In this situation there are only a few producers but many buyers, and the action of one producer will affect the influences of other producers. (www.oligopolywatch.com) when this happens the producers can’t decide on a price like a monopoly can and they often turn into competitors. When they do compete on price, they may produce as much and ch...
... middle of paper ...
...a product or service. Just by looking at Easy Jet, you can see that competition has an affect and for them to keep their customer base they have to cut costs so demand for the service will still be there. If they don't cut flight costs then they may lose the demand to rival budget airlines. The increase in Air Passenger Duty Tax and landing charge increases also affect the company and so therefore affect customers.
Competitive advantage - to get an edge over your rivals you must adopt cost leadership strategy (producing at a lower cost), differentiation strategy (these may be color or size differences or alternatives for different market segments) and focus strategy (concentrate on different market segments).
Works Cited
• http://www.economist.com/economics-a-to-z/c
• www.oligopolywatch.com
• www.quietlyconfident.co.uk/easyjet.doc
• (www.strategicassetts.co.uk)
When the word monopoly is spoken most immediately think of the board game made by Parker Brothers in which each player attempts to purchase all of the property and utilities that are available on the board and drive other players into bankruptcy. Clearly the association between the board game and the definition of the term are literal. The term monopoly is defined as "exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices" (Dictionary.com, 2008). Monopolies were quite common in the early days when businesses had no guidelines whatsoever. When the U.S. Supreme Court stepped into break up the Standard Oil business in the late 1800’s and enacted the Sherman Antitrust Act of 1890 (Wikipedia 2001), it set forth precedent for many cases to be brought up against it for years to come.
Monopoly, means that a firm is sole seller of a product without any close substitutes, controls over the prices the firms charge. Government sometime grants a monopoly because doing so is viewed not only to be in the public interest, but also to encourage it with price incentives. However, monopolies fail to meet their resource allocation efficiently, producing less than the socially desirable quantities of output and charging prices above marginal cost. Thus, this inefficiency of monopoly causes the quantity sold to fall short of social needs. In order to handle the problems, policymakers in the government regulate the behavior of monopolies and try to make monopolized industries more competitive
An oligopoly usually consists of two to ten companies that are selling products with little to no differentiation. While the companies do hold some control over the price of the product they are selling, it is mostly dependent of the pricing of the competitors’ product. The companies in an oligopoly rely heavily on advertising and marketing their products to appeal to consumers. This is because all the companies in the oligopoly have to try to stay a step ahead of their competitors in order to appeal to consumers (S, S.). An example of an oligopoly is the cell phone industry. Verizon, AT&T, Sprint, and T-Mobile are the four dominating competitors in the market. These four companies are the only ones offering a reliable plan, at a (not so) decent price. They are constantly advertising, it seems as if every other commercial and ad you see is for one cell phone company or another, for one outrageously expensive plan or another. This goes to show that just because there is some semblance of competition between companies in a market, does not mean that consumers will be receiving a fair price on a product or
There are four different categories into which economists classify industries. These categories are perfect competition, monopolistic competition, oligopoly, and monopoly. Each of these four categories has its own unique characteristics. Perfect competition has an unlimited number of firms, while a monopoly has one single firm, and an oligopoly consists of a small number of interdependent firms. The demand curve of an oligopoly depends on how firms choose to deal with their interdependence with the other firms in the industry. A firm within an oligopoly market can choose to cooperate with other firms in the industry, which is illegal, or the firm can choose to compete against the other firms. An oligopoly produces either differentiated products or homogenous products. In an oligopolistic market, entry barriers, which prohibit new firms from entering the industry, are present. Examples of entry barriers include patents, brand loyalty and trademarks. Long-run economic profits are possible for an oligopoly, and non-price competition is a significant way to compete with other firms in the same market. Most of the non-price competition in an oligopoly comes from product differentiation. The cereal manufacturing industry is an oligopolistic market because it exhibits many of these traits.
Oligopoly is a market structure where there are a few firms producing all or most of the market supply of a particular good or service and whose decisions about the industry's output can affect competitors. Examples of oligopolistic structures are supermarket, banking industry and pharmaceutical industry.
Perfect competition, also known as, pure competition is defined as the situation prevailing in a market were buyers and sellers are so numerous and well informed that all elements of monopoly
•Perfect competition: This happens when lots of small firms compete against one another. These firms are in a very challenging industry to manufacture the socially optimum output level at a very small cost to the firm.
There are four major market structures; perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect competition is the market structure in which there are many sellers and buyers, firms produce a homogeneous product, and there is free entry into and exit out of the industry (Amacher & Pate, 2013). A perfect competition is characterized by the fact that homogeneous products are being created. With this being the case consumers have no tendency to buy one product over the other, because they are all the same. Perfect competitions are also set up so that there is companies are free to enter and leave a market as they choose. They are allowed to do with without any type of restriction, from either the government or the other companies. This structure is purely theoretical, and represents and extreme end of the market structure. The opposite end of the market structure from perfect competition is monopoly.
In a perfectly competitive market, the goods are perfect substitutes. There are a large number of buyers and sellers, and each seller has a relatively small market share. Perfect competition has no barriers to information regarding prices and goods, meaning there is no risk-taking behaviour – sellers and buyers are rational. There is also a lack of barriers for entry and exit.
An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies. Although firms in oligopolies have competitors, they do not face so much competition that they are price takers (as in perfect competition). Hence, they retain substantial control over the price they charge for their goods (characteristic of monopolies).
A Monopoly is a market structure characterised by one firm and many buyers, a lack of substitute products and barriers to entry (Pass et al. 2000). An oligopoly is a market structure characterised by few firms and many buyers, homogenous or differentiated products and also difficult market entry (Pass et al. 2000) an example of an oligopoly would be the fast food industry where there is a few firms such as McDonalds, Burger King and KFC that all compete for a greater market share.
The Perceived Demand Curve for a Perfect Competitor and Monopolist (Principle of Microeconomics, 2016). A perfectly competitive firm (a) has multiple firms competing against it, making the same product. Therefore the market sets the equilibrium price and the firm must accept it. The firm can produce as many products as it can afford to at the equilibrium price. However, a monopolist firm (b) can either cut or raise production to influence the price of their products or service. Therefore, giving it the ability to make substantial products at the cost of the consumers. However, not all monopolies are bad and some are even supported by the
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
Perfect and monopolistic competition markets both share elasticity of demand in the long run. In both markets the consumer is aware of the price, if the price was to increase the demand for the product would decrease resulting in suppliers being unable to make a profit in the long run. Lastly, both markets are composed of firms seeking to maximise their profits. Profit maximization occurs when a firm produces goods to a high level so that the marginal cost of the production equates its marginal
The world that exists today thrives on the economy and although it is fair most of the time there are certain situations in which one company or business gets more control than anyone else, this is called a monopoly and as defined by Websters dictionary it is “exclusive ownership through legal privilege, command of supply, or concerted action” showing that is is basically a way to control a specific good or service for the company’s own benefit. While it might be seen as a negative having monopolies around, in some situations it is necessary to have these businesses. Monopolies are all around the world through many different countries and occur in many different kinds of businesses. The characteristics of a monopoly show us more about the different aspects of running company that becomes a monopoly. Monopolies create barriers to entry for new people who want to enter that business or that type of market. There are different types of monopolies that create different market types and end up controlling the market in different ways. With all of the power that monopolies have there are strong regulations on monopolies so that their power is limited. A monopoly may seem like a complex idea to understand but with the right information it is easy to comprehend why monopolies compete in the way that they do. With the correct information monopolies while