3. Perfectly
Competitive
Market
• Less market power
• Price takers
• Goods are
homogenous
• Free entry and exit
• Perfect Information
Monopolistic
Competition
• Many firms
• Free entry and exit
• Differentiated but
highly
substitutable
product
Oligopoly
• Small number of
firms
• Product
differentiation may
or may not exist
• Barriers to entry
Monopoly
• There is market
power
• Single seller
• One product
(limited or no good
substitutes)
• Barriers to entry
TYPES OF MARKET STRUCTURE
4. Perfectly Competitive Markets
Price Taking
1. The individual firms sells a very
small share of the total market
output and, therefore, cannot
influence market price.
2. The individual consumer buys
too small a share of industry
output to have any impact on
market price.
5. Perfectly Competitive Markets
• Product Homogeneity
1. The products of all firms are
perfect substitutes
2. Example
– Agricultural
products
6. Perfect Information
1. Buyers and sellers have all the
pertinent information necessary
for them to make decisions on
buying or selling goods and
services.
Perfectly Competitive Markets
7. Monopolistic Competition
• Imperfect or Monopolistic Competition
–Many buyers and sellers
–Products differentiated
–Relatively free entry and exit
–Each firm may have a tiny ‘monopoly’
because of the differentiation of their
product
–Firm has some control over price
–Examples – restaurants, professions –
solicitors, etc., building firms – plasterers,
plumbers, etc.
8. Water Refilling Station
• The 1980s saw
proliferation of
gadgets and
equipment to purify
water.
• The purification was
done mostly at
home.
• Only simple process
of passing tap water
through a filter.
Monopolistic Competition
9. • The 1990s added the
sophistication of water
purification technology
with the entrance of
bottled water. Raw water
passed through 6-8
processes of treatment.
• The sophistication, along
with packaging, branding,
manufacturing costs, led
to drinking water being
expensive.
Monopolistic Competition
10. • Water refilling
stations provided a
cheaper alternative.
More than 3,000
stations are estimated
to have been put up
in the country
presently.
• Initially, customers
came to stations with
their own containers.
Monopolistic Competition
11. Water Refilling Station
• Eventually, services
extended free delivery of
5-gallon containers with
free use of a hot and cold
dispenser provided a
minimum weekly
consumption is met.
• Some stations also sold
different types of
dispensers and smaller
sizes of bottled water.
12. Monopolistic competition
• There are no barriers to entry. In
other words, there is free entry and
exit.
• There is product differentiation. The
station claims to offer water
treatment different from other
stations through different technology.
Thus, their treated water supposedly
are slightly different from their
competitors.
• Products are substitutable with one
another.
13. The barriers to entry are:
1. Natural
– Scale economies
– Patents
– Technology
– Name Recognition
2. Strategic Action
– Flooding the market
– Controlling an essential input
oligopoly
15. MobileCellularPhoneIndustry
Prior to 1995, landline telephone dominated the
telecommunication sector. PLDT was considered a monopoly back
then.
In 1995, the Telecommunication Act of the Philippines (RA 7925)
was enacted, setting the policy for competition and liberalization
of the telecommunication sector.
It opened up the paging and the mobile telephone business.
16. Strategic Actions
• Before SUNCELL entered the market,
instead of price being lowered, strategic
actions were being exhibited to gain bigger
shares of the market
17. • The Telecommunication industry
(landline) started out as a
monopoly.
• As a whole, the mobile cellular
phone market is a Oligopolistic
market.
–Three Major Players
–Services are slightly differentiated
–There are barriers to entry
oligopoly
18. • Barriers to entry
1. Control of Inputs
– firm may own the total supply of
a raw material that is essential in
the production of some product.
– DE BEERS / MERALCO
2. Economies of scale
– One supplier can produce at a
lower per-unit cost than several
smaller firms.
monopoly
19. 3. Patents
– Exclusive rights given to inventors
for a limited period of time.
– AT&T / BELL COMPANY
4. Licenses/Franchises
– Granted by the government as a
condition for operating in the
market.
Monopoly
20. • The monopolist is the supply-side
of the market and has complete
control over the amount offered
for sale.
• Limited by Demand
Monopoly
