What are the characteristics of competitive and less competitive

What are the characteristics of competitive and less competitive markets?

• Less competitive markets have a large number of buyers and sellers, low barriers to entry, differentiated products, perfect information, and price determination through market forces.
• Factors that restrict entry into an industry and give cost advantages to existing firms. Examples would include the large size of existing firms, control over any central resource or information, and legal rights such as patents and licenses.

• Competitive markets have a small number of buyers and sellers, high barriers to entry, homogeneous products, perfect information, and price determination through market forces.
• Competitive markets have a large number of buyers and sellers, low barriers to entry, differentiated products, perfect information, and price determination through the actions of a few dominant firms.

Competition

• Attempts by two or more people or organizations to get the same goods, services, productive and financial resources. Consumers compete with other consumers for goods and services. Producers compete with other producers for sales to consumers.

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Differentiation

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• Making a non-price distinction between the features or characteristics of one's product or service from those of similar products and services.

Industry

• A distinct group of productive or profit-making enterprises sharing similar products or services. (Ex: the automobile industry- Ford, Chevy, Nissan, Toyota, Honda, Dodge).

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Perfect-competition

• A market structure in which a large number of relatively small firms produce and sell identical products and in which there are no significant barriers to entry into or exit from the industry. Firms in perfect competition are price takers and in the long run will earn only normal profits.

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Oligopoly

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• A market structure in which a few, relatively large firms account for all or most of the production or sales of a good or service in a particular market, and where barriers to new firms entering the market are very high. Some oligopolies produce homogeneous products; others produce heterogeneous products.

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Examples of industries that may be oligopoly

• 1. Movie industry- 6 major film studios make 90% of the films in the US (20th century Fox, Warner Brothers, Paramount, Columbia, Universal, Disney Studios).
  2. Cell phone- 4 cell phone carriers control 89% of the market (Verizon, Sprint Nextol, AT&T Mobile, T-Mobile).
  3. TV industry is mostly 7 companies- The Walt Disney Company, CBS Corporation, Viacom, Comcast, Hearst Corporation, Time Warner, and News Corporation).

• Education, entertainment, and energy industry
• Construction, technology, and hospitality industry
• Agriculture, healthcare, and retail industry

Monopoly

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• A market structure in which there is a single supplier of a good or service. Also, a firm that is the single supplier of a good or service for which there are no close substitutes; also known as a monopolist.

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Natural Monopoly

• A type of monopoly that exists due to intense competition in a specific industry.
• A type of monopoly that exists due to government intervention in a specific industry.
• And industry in which the advantages of large-scale production make it possible for a single firm to produce the entire output of the market at a lower average cost than a number of firms each producing a smaller quantity.

• A type of monopoly that exists due to low fixed or start-up costs in a specific industry.

Monopolistic Competition

• A market structure in which slightly differentiated products are sold by a large number of relatively small producers, and in which the barriers to new firms entering the market are low.

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