Title: MARKET STRUCTURES
1MARKET STRUCTURES
2COMPETITION
Imperfect
Perfect
Some control over price
No control over price
No control over price
Some control over price
p
p
d
d
q
q
3Perfect Competition
Many
Sellers Product Barriers to Entry Example
Homogenious - Identical
None
Dairy farmers
4Monopolistic Competition
Many
Sellers Product Barriers to Entry Example
Differentiated
Weak
Restaurants
5Oligopoly
A Few
Sellers Product Barriers to Entry Example
Differentiated
Strong
Oil Companies
6Duopoly
Two
Sellers Product Barriers to entry Example
Differentiated
Strong
Mobile Phone Service
7Monopoly
One
Sellers Product Barriers to Entry Example
One - no close substitutes
Strong
Vectra NZ
8Non-Price Competition
- Product Differentiation
- Make the product appear different
- Product Variation
- Make the product really different
9Product Differentiation
Location
Advertising
Branding
Packaging
Sponsorship
Service
Loyalty Schemes
10Product Variation
- Product modification
- When producers make real changes to their product
eg Vodofone introduce txt capabilities to their
phone service
- Vertical product variation when producers
offer variations of a product - Eg Vodofone offer many plans and prepay options.
11Kinked Demand Curve
If producer reduces price (from P2 to P3) the
competitors are likely to follow. The result is a
smaller increase in sales from q2 to q3.
(inelastic demand).
p
P1 P2 P3
d
If producer increases price (P2 to P1) the
competitors are unlikely to follow. The result is
a larger fall in sales from q2 to q1 (elastic
demand)
q
q1 q2 q3