Other market structures Monopoly, monopolistic competition, oligopoly

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Monopoly

Monopoly

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Perfect (complete, absolute) monopoly

Perfect monopoly = there is only one supplier of

Perfect (complete, absolute) monopoly Perfect monopoly = there is only one supplier
a good in the market
In fact 80-90% share in the market is treated as example of monopoly.
Private monopoly is very rare. It is usually public (national) firm.

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Features of monopoly

Product of monopolist doesn’t have close substitutes.
Its customers are

Features of monopoly Product of monopolist doesn’t have close substitutes. Its customers
very dispersed. They can’t influence decisions of monopolist.
Monopolist is price-setter.
Monopolist doesn’t have incentives to use promotion tools in order to compete (unless as public relations tool).
Monopolized market is rather rare.

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Examples
Big public utilities firms (energy, water, gas).
Cosmic industry.
Arming industry.

Examples Big public utilities firms (energy, water, gas). Cosmic industry. Arming industry.

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Reasons for monopolisation
Barrier of entry and exit:
large capital requirements,
limited market („there is

Reasons for monopolisation Barrier of entry and exit: large capital requirements, limited
place only for one player”),
legal barriers (patents, concessions, licences).

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Price discrimination
Price discrimination = differentiating of price of the same good
Types of

Price discrimination Price discrimination = differentiating of price of the same good
price discrimination:
different prices for different groups of buyers,
different prices for additional units of good.

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Reasons for price discrimination

Price discrimination is used when it is possilbe to

Reasons for price discrimination Price discrimination is used when it is possilbe
divide buyers into groups of different price elasticity of demand. It is rational to differentiate price in order to maximize revenues from sales.

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Antimonopoly policy

Monopolist may be tempted to overuse its strong position in the

Antimonopoly policy Monopolist may be tempted to overuse its strong position in
market.
This the reason for using antimonopoly policy by governement.

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Monopolistic competition

Monopolistic competition

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Features of monopolistic competition

Relatively large number of firms.
Their products are close

Features of monopolistic competition Relatively large number of firms. Their products are
substitutes.
Individual firm can influence price it receives in the market, but this impact is limited and dependent on possibilities to differentiate goods.
It is very frequent case.
Easiness of enter and exit.

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Examples
Retailers.
Clothes industry.
Shoes industry.
Furniture industry.

Examples Retailers. Clothes industry. Shoes industry. Furniture industry.

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Means of competing
Price competition (rarely).
Quality competition.
Marketing competition.

Means of competing Price competition (rarely). Quality competition. Marketing competition.

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Oligopoly

Oligopoly

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Features of oligopoly

Small number od firms; several of them have predominant position.
Products

Features of oligopoly Small number od firms; several of them have predominant
can be differentiated (more often) as well as standardized.
Substantial barriers of entry and exit (mostly technological or legal).
Majority of markets has this structure.

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Examples
Raw materials: petroleum, metals, brimstone.
Consumption goods of one-time use: coffee, tea, means

Examples Raw materials: petroleum, metals, brimstone. Consumption goods of one-time use: coffee,
of cleannes.
Lasting consumption goods: cars, electronic equipment, ships

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Means of competing

Price competition (extremely rare because risky; frequent practice is price

Means of competing Price competition (extremely rare because risky; frequent practice is
agreement).
Quality competition.
Marketing competition.
Competing by innovations (creating new types of demand).
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