Markets Structure: Monopolistic Competition, Duopoly, Oligopoly Meaning of Market In the ordinary sense, the term market refers

to a place where buyers and sellers meet for the purpose of exchange. However, Market need not be the place of exchange. American Marketing Association defines a market "as the aggregate demand of the potential buyers for a product or service" Features of Market: 1. A market involves exchange of goods and services between the buyers who are willing to buy and the sellers who are willing to sell. 2. 'Demand' from the buyers and 'supply' from the sellers are the two market forces. 3. The interaction of demand and supply determines the price in the market. 4. There is free entry and exit of large number of buyers and sellers in a competitive market. 5. The seller sells their goods in the market with a view to earn profit and the buyers buy the goods to satisfy their wants. 6. The market can be of any size; large or small, local or national or international. 7. There can be buyers' market where the supply exceeds demand, and there can be sellers' market where demand exceeds supply. 8. Market need not necessarily refer to a place. Buyers and sellers may meet personally or they can contact each through various means of communication. In economics, The market structure are generally classified on the basis of competition in the market. Thus, there are following types of markets: * Perfect competition * Oligopoly (where few sellers control the market) * Duopoly (where two sellers control the market) * Monopolistic Competition * Monopoly There are two extreme forms of market structure, i.e., perfect competition and monopoly. In between the two extremes, we have monopolistic competition, oligopoly, and duopoly. Perfect Competition Perfect competition is a market situation where there are large number of buyers and sellers buying and selling homogeneous products at single uniform price. Perfect competition is an idealistic concept and not real one. Perfect competition may be applicable to0 certain farm products and that too for certain period, and may be in a selective part of the market. Condition or Features of Perfect Competition: The following are the condition or features of Perfect competition. 1. Large number of buyers and sellers: There are large number of buyers and sellers in perfectly competitive market. It means that: * The number of buyers is so large that a single buyers can not influence the market demand. * The number of sellers is so large that a single seller can not influence the market supply. * Each buyers and sellers is a 'Price taker' who has to accept the price in the market which is determined by the force of demand and supply. * A single can sell any amount of commodity at a given price. * A single buyers can also buy any amount of commodity at a given price. 2. Homogeneous product: The product supplied in the market are identical in all respects. In other words, the products are homogeneous in respect of shape, size, Color, taste, quality etc. So, the buyers do not have a specific preference for a particular seller or for a particular brand.

3. Free Entry and Exit: There is complete freedom for exit and entry of seller and buyers in the market. Any seller or buyers can enter the market or exit from the market as and when he wants. 4. Perfect Knowledge: There is perfect knowledge on the part of the buyers and sellers regarding the market condition, price and features of the product etc. 5. Perfect mobility of Factors of Production: The factors of production are perfect mobile in the sense that they are completely free to move from one industry to another or from one market area to another or from one occupation to another. 6. Absence of Transport Cost or Uniform Transport Cost: It is assumed that all the sellers are equally near or far away from the markets, and as such there are uniform transport costs to all the sellers. So, it is assumed that the transport is absent or constant for all the seller. 7. Absence of Government Interference: There is no government intervention in respect of production, transportation and exchange of goods, In other words, There are no Government restrictions. The market forces of demand and supply are freely allowed to determine the price in the market. 8. Uniform Price: There exist a single uniform price in the market and it is determined by the forces of demand and supply.

Pure Competition Pure competition and perfect competition are not one and the same. Pure competition refers to a market situation where there is no monopoly at all. Pure competition is a market is part of perfect competition. Pure competition full files certain conditions of perfect competition. Features of Pure Competition: 1. Large Number of Sellers: In pure competition, there are a large number of sellers. The numbers of sellers is so large that a single seller can not influence the supply and consequently the price in the market. 2. large Number of Buyers: In pure competition, there are a large number of buyers. The numbers of buyers is so large that a single buyer can not influence the demand and consequently the price in the market. 3. Homogeneous Product: The product supplied by all the sellers is homogeneous or identical in all respects of size, colour, shape quality etc. 4. Free Entrance and Exit: there is complete freedom of entry into and exit from the market. any buyers or seller can enter the market or exit from the market as and when h wants. 5. uniform Price: There exists a single Uniform price in the markets and it is determined by the forces of demand and supply. PRICE DETERMINATION UNDER PERFECT COMPETITION Under perfect competition there exists a single price for a particular products in the entire market. this price is called as 'equilibrium Price'. Equilibrium price is that price at which the demand for a commodity is equal to its supply. equilibrium price is determined by the interaction of the force of demand and the supply in the market. In perfectly competitive market, there is only one price of a commodity and it is called equilibrium price. Equilibrium Price Determination under Perfect Competition: Under perfect competition, price is determined by the interaction of the market forces of demand and supply. Sellers want to sell their products at the highest possible price and buyers wants to buy the goods at the lowest possible price. Price is determined at a point where the market forces of demand and supply interact and exchange take place. The price at which demand is equal to supply and exchange take place is called Equilibrium price. This can be explained with the help of the following scheduled and diagram. Equilibrium Price Determination Diagram

From the above diagram it can be observed as follows: (1) When the price is OP1 (higher Price), the demand is 'p1a' and the supply is "P1b'. It means that at OP1 price(higher price), supply exceeds demand. There is disequilibrium in the market. Hence Op1 price will not prevail in the market and the price has to come down to that level at which demand is equal to supply. (2) When the price is OP2(lower price), the demand is 'P2a' and the supply is 'P2c'. It means that at OP2 price(lower price), demand exceeds supply. There is also disequilibrium in the market. Hence OP2 price also will not prevail in the market and the price has to go to that level at which demand is equal to supply. Conclusion: Thus, from the above scheduled and diagram, it is observed the equilibrium price is determined by the interaction of demand and supply. It is the price at which demand is equal to supply. It is the price which going to prevail in the market. Importance of time element in price determination. Time elements is very important in the analysis of price determination. The supply of commodity is influenced by the time period. Marshall dividend the pricing of product in to four periods: * very Short Period (Market Period). * Short Period. * Long Period. * Very Long Period. 1. Market Period. Meaning : It is a market situation in which increase in demand for the commodity lasts only for a very short time so that there is no much time to increase the supply to meet the demand. So, the supply remaining perfectly inelastic, the demand increases and it lasts only for a very short time. Duration: This market may be for few hours or few days. Nature of Demand: The demand increases, but it will last only for a very short time. Nature of Supply: There is no much time to increase the supply to meet the demand. So, supply remains fixed or perfectly inelastic.

Price determination: Since the existing supply becomes the quantity demanded and supply remaining perfectly inelastic, price is demanded solely by the force of demand as shown below. This market 9Market Period) is relevant to perishable goods.

2. Short Period Meaning : It is a market situation in which increase in demand for the commodity lasts for some time so that there is some time to increase the supply to certain extent to meet the demand.

Duration: This market may be for few weeks or few months. Nature of Demand: The demand increases and it lasts for quite some time. Nature of supply: There is some time to increase the supply to a certain extent. The supply can be increased to a certain extent by intensive utilization of the existing resources such as utilizing the unutilized production capacity or by increasing the variable factor of production. so, the supply becomes relatively inelastic. Price Determination: Price is determined by the interaction of both short period supply and demand curves as shown below this market is relevant to sweats during, Cakes during X' mas etc. 3 Long Period Meaning: It is a market situation in which increase in demand for the commodity last for many years so that there is enough time to increase the supply to great extent to meet the demand.

Duration: This market period may be for some years. Nature of Demand: There is enough time to increase the supply to a great extent. The supply can be increased by changing the variable as well as fixed factor of production. So, supply becomes relatively elastic. Price determination: The price is determined by the interaction of long period demand and supply forces as shown below. It is called 'Normal price' which is going to prevail in the market in the long run. 4. Very Long Period(secular): Meaning: It is a market situation in which increase in demand lasts for several years or descends so that there is enough time is increase the supply to the maximum extent possible to meet the demand. Duration: This market period may be for several years or decades. nature of Supply: There is enough time to increase the supply fully to meet the demand. The supply can be increased by bringing total change in the production process such as introducing new technology or method in the production process such as introducing the new technology or method in production. Supply becomes more elastic. Price Determination: The price determined by the interaction of very long supply and demand curves. Monopoly The term 'monopoly' is derived from two greek words 'mono' which means' one' and 'poly' which means 'seller'. Monopoly is a market situation where there is only one seller who commands complete control over the supply of

particular commodity, for which there are no close substitutes. There is no competition in the market, therefore, the selle is price maker and not a price taker. Features Of MONOPOLY: 1. SINGLE SELLER: In a monopoly market, there is a single seller. The single seller controls then price and supply in the market. Although , there is one seller, there may be many buyers depending upon the nature of the product. 2. Absence of Close Substitutes: In a monopoly situation, the monopolist sells a product which has no close substitutes. Therefore, the buyers have no choice, but to buy the product, or go without it. 3. Barrier to Entry: Under monopoly situation, there are entry barrier to other firms. The seller may have complete hold over the supply in the market. The seller may have exclusive marketing rights to market the product in a particular area or country for a certain period. For instance, product patents enable a marketer to have exclusive marketing rights. No other firm is allowed to sell that type of product, without taking prior permission from the patent holder. 4. Absence of Competition: Since there is only one seller of a product without having close substitutes, there is absence of competition in the market. In other words, the seller enjoys complete monopoly. 5. No distinction between Firm and Industry: Since there is only one seller, there is no distinction between the firm and the industry. The firm itself becomes the industry for that type of product. 6. Profit Maximization is the main Goal: The main objective of the monopolist is profit maximization . Therefore, the monopolist will try to sell as much as he can at the best possible price. The monopolist can control the supply, but that does not mean hr can charge whatever price he wants. The monopolist cannot control demand. Consumer may not buy at exorbitant prices in such a way that consumer are induced to increase their purchase, whereby, he can make a good amount of profit. 7. Price maker: In a monopoly, the seller is a price maker. Under monopoly, there is a single seller of a commodity, which has no close substitutes. The seller is controlling the entre supply in the market. Therefore, he can dedicate the market price, and as such the seller under monopoly can be called as price maker. It is to be noted that although the monopolist is a price maker, he cannot fix the price, as well as the output. He can fix either one of them Normally, the price under monopoly is higher than that of perfect competition. The main objective of the seller is profit maximization. to earn highest profit, he would like to sell highest possible output at highest possible price. But this is not possible. The monopolist can fix either the price or the output and not both. He can fix the output level, and the price would be determined by the demand for the product. Or, he can set the price, and the output would be determined by the demand of the consumer at that price. 8. Downward Sloping Demand Curves: A monopolist faces a downward slopping demand curve as in Fig. This indicates that, thought he is a price maker, he cannot charge a very high price. This is because he cannot disregard the demand situation. Since the demand curve is downward slopping, he can increase the sale by lowering the price. Types of Monopoly The Important types of monopoly are the following: 1. Pure or Perfect monopoly: A pure perfect monopoly means that the firm controls the supply of a product for which there is not even a remote substitute. Such a monopoly is very rare. 2. Natural monopoly: The monopoly power is acquired due to natural advantages such as good location, control over scarce resources, in movement of huge investment, etc. 3. Legal monopoly: it arises due to legal protection given to the producer in the form of patents, trade marks, copyrights, etc. The law prevent the potential competitors from producing identical products. 4. Technological Monopoly: Big firms enjoys technological monopoly due to their suprerior technology and economics of scale. Other firms which do not have the access to such technology cannot produce the quality goods produced by big firms. 5. Simple Monopoly: In a simple monopoly the firm has monopoly power over a product or service, but it chages a uniform price to all the buyers. 6. Discriminating Monopoly: In a discriminating monopoly, the firm charges different prices to different buyers in the same market or in different markets for the same product. 7. Private Monopoly: When an individual or a private firm controls the production it is regarded as private monopoly. 8. State or Social Monopoly: when the government owns and control the production of a good or service it is called stat or social monopoly. Source of Monopoly

There are many factors which given rise to monopoly power. The important factors are: 1. Natural Resources: Some monopolies arise on account of availability of natural resources like gold, crude oil, etc. When these resources are controlled by government or private firm it gives rise to monopoly. 2. Technology: New technique of production or discovery of new technology helps the firm to acquire monopoly power, As long as the technology is not made available to cover the original firm

3. Legal Protection: Legal protection given by the government in the form of patent rights, trademarks, copyrights, license, etc gives monopoly power to the person or firms. 4. Cartel Formation: If a product produced by a few producers and if they come together and form a cartel it creates monopoly. Organization petroleum exporting Countries (OPEC) is a good examples of cartel. 5. Barriers to Competition: A firm may follow a limiting-price policy i.e a price which does not attract new firms. It may also follow aggressive advertising and/or a continuous product differentiation. Such practices prevent the entry of new firms. This gives rise to monopoly power to the existing firm. Monopolistic Competition The concept of monopolistic competition was introduced by E.H Chamber line in his book " Theory of monopolistic Competition" in 1933. Monopolistic competition is a market structure in which there is large number of firms that produce and sell similar but differentiated products to large number of buyers. The monopolistic competition exists between the seller of differentiated products. This type competition lies between perfect competition and monopoly. Examples of monopolistic competition include FMCG products like toothpaste, soaps, etc. and even consumer durable are similar in nature, but are differentiated in terms of shape, size, color, design, etc. Features of Monopolistic Competition: 1. Large number of seller: There are many seller or firms in a monopolistic competition. A single seller is not large enough to influence the market. Each one may, to certain extent, follow an independent price and output policy without distributing others. There is no much interdependence between the seller. Thus, it is possible for each seller to pursue an independent course of action. The impact of such actions is not seriously felt by the competitors. 2. Product Differentiation: Products are differentiated in monopolistic competition. Products differ from each other in many ways. Product differentiation can take place in the form of brand name and trade mark. Products may also be differentiated in terms of color, size, design, taste, etc. These characteristics can be seen in textiles, soaps and many other products. good salesmanship and better after sale-service also gives differentiation to the product. 3. Close substitutes: Even though the products are differentiated they are very close substitutes. For example, as far as brands are concerned, there are many close substitutes for products like soaps and garments. However, they are not perfect substitutes as in perfect competition. 4. Selling cost: Firms in a monopolistic competition promote sales by incurring selling cost. Selling cost includes all types of costs incurred to promote sales. Selling cost is usually incurred in the form of advertisement, exhibitions, gifts, free samples and so on. Selling cost is incurred to influence consumer's demand and promote sales. 5. Freedom of entry and exit: Another important feature of monopolistic competition is the freedom of entry and exit of firms. A firm is free to inter the market to produce a product which is a substitute for the existing profit by the existing firms will attract more firms to enter the market. On the other hand, a loss will compel them to leave the market. 6. Price maker: In monopolistic competition the firm is price maker. The firm has some control over the price due to product differentiation. Thus, there are price differentials between the firms producing close substitutes. 7. Nature of demand curve: The demand curve for the products of each firm is downward sloping. This means that an individual firm can sell more by reducing the price. It is comparatively more elastic than under monopoly due to the availability of close substitutes. The demand survey of a firm under monopolistic competition. 8. Three Dimensional Competition: Under monopolistic competition, there can be dimensional competition: * Price Competition: Where competing firms compete on price differential such as airlines, washing powders, or any other product, where price difference is given major focus in marketing communication such as advertising. * Non-price Competition: Where competing firms compete on product or service differential, such as product features, or after sale-service, and so on. * Price and Non-price competition: A good number of firms compete with each other on price differential as well as non-price differentials.