Market structure
Topic: Market Structures, Market Failure and Competition · NCERT: Beyond NCERT
Meaning
A market structure is a way of grouping markets by how competitive they are. It looks at five features:
- how many sellers and buyers there are, and how big they are;
- whether the product is identical (homogeneous) or differentiated;
- how easy it is to enter or leave the market;
- how much information buyers and sellers have;
- how much control a firm has over price.
The range runs from perfect competition, with very many small price takers, through monopolistic competition, oligopoly and duopoly, to monopoly, a single seller. There are also buyer-side versions: monopsony (one buyer) and oligopsony (a few buyers).
Example
Vegetables in a farm mandi come close to perfect competition. Restaurants and FMCG shampoo brands are monopolistic competition. Cement, steel and aviation are oligopolies. Indian Railways' rail passenger service is a monopoly.
Related concepts
- Market power
- Barriers to entry
- Product differentiation
- Market concentration
- Herfindahl-Hirschman Index
- Concentration ratio
- Price maker