Market Structure Chapter 6

Perfect Competition Buyers vs. Sellers Example: – Farmers Market Four Condition: – Many buyer and sellers act independently – Sellers offer identical products – Buyers are well informed about products – Sellers can enter and exit the market easily

Competition and Market Structure Perfect Competition Monopolistic Competition Oligopoly Pure Monopoly

Monopolistic Competition Product Differentiation – They try to make them sound different Nonprice Competition – ‘name brand’ Profits – Boosting the profit line

Oligopolies There are only a few large sellers Sellers offer identical or similar products Other sellers cannot enter the market easily

Oligopoly Cont. Nonprice Competition – Coke and Pepsi generally cost the same Interdependent Pricing – Gas stations respond to each other’s changing prices Collusion – Apple and publishers and being investigated Cartels – DeBeers controls the distribution and sales of most of the worlds diamonds

Monopolies Single seller, no close substitutes, others cannot enter market easily Natural Monopoly (eg. Military) Geographic Monopoly (less common now) Technological Monopoly (Makes of nuclear subs) Government Monopoly

Monopoly Cont. Consumer Demand – High consumer demand brings in new players Cell phone service Potential Competition – Such high profits, someone else breaks in Cable companies Government Regulation

Market Regulation Big Business Trusts Laissez-faire principle Early Antitrust Legislation Antitrust legislation Price discrimination

More Legislation Interstate Commerce Act (ICA) Sherman Antitrust Act Clayton Antitrust Act Federal Trade Commission Act The Robinson-Patman Act

WHAT DOES ALL THIS MEAN? Thinking and Writing Critically Sellers try to differentiate their products in many ways. List three products that you buy. How do the manufacturers attempt to differentiate them? Is this market perfectly competitive? Explain your answer. One full page.