Main types of market structures and their functions

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

Types of market structures depend on the environment in which they operate. For example, to which industry a particular business entity belongs. Researchers in their analyzes have identified the criteria that are involved in determining the variety, namely:

• number of companies that represent certain products manufactured by a particular industry;
• characteristics of finished products (differentiated or standard);
• presence of barriers or their absence on the way of entry of companies into a certain industry (exit from it);
• accessibility of economic information.

Types of market structures of imperfect competition cannot be unambiguously defined. That is why the manufacturer has certain opportunities to influence the market. Types of market structures depend on subspecies of imperfect competition. Thus, when operating under conditions of monopoly, the imperfection in competition is small and is associated only with the ability of the manufacturer to produce different varieties of goods. In an oligopoly, the main types of market structures are broadly classified and depend on the activities of existingcompanies. The presence of a monopoly implies the dominance of only one manufacturer in the market.

The types of market structures are closely related to the products offered, especially when it comes to a limited number of companies. Thus, large corporations, having concentrated in their hands a large part of the proposals on the market, may find themselves in special relations with other business entities and the market environment. First, if they have a dominant position in the market, they can have a significant impact on the sale of products. Secondly, there may be some changes in the relationship between the market participants themselves. Thus, the attention of manufacturers is focused on the behavior of their competitors, so that their reaction to a change in their behavior is timely.

Types of market structures in conditions of perfect competition - some abstract models that are quite convenient for analyzing the basic principles of organization of market behavior of companies. The reality says otherwise, competitive markets are quite rare, since each company has its own “face”, and each consumer, when choosing the goods of a certain company, chooses as a priority product that is characterized not only by its usefulness, but also by price, and also the attitude of the buyer himself to this company and the quality of its products.

This is why types of market structures are more numerous in markets with imperfectcompetition, which got their name due to the presence of imperfect spontaneous mechanisms of self-regulation. In this environment of the functioning of companies, one can observe the principle of the absence of deficits and surpluses, which may indicate the achievement of efficiency in the perfection of the market system.