Documente Academic
Documente Profesional
Documente Cultură
characteristics of a market.
ADVERTISEMENTS:
ADVERTISEMENTS:
On the other hand, if a seller decreases the prices of its products, then
customers may become doubtful about the quality of products.
Therefore, in pure competition, sellers act as price takers. In addition,
in a purely competitive market, there are no legal, technological,
financial, or other barriers for the entry and exit for organizations.
In Figure-2, OP is the price level at which a seller can sell any quantity
of products at the fixed market price.
ADVERTISEMENTS:
Monopoly:
The term monopoly has been derived from a Greek word Monopolian,
which signifies a single seller. Monopoly refers to a market structure in
which there is a single producer or seller that has a control on the
entire market. This single seller deals in the products that have no
close substitutes.
This leads to a full control of the seller on the supply of products in the
market. In addition, under monopoly, the seller enjoys the power to
decide the price of products. Therefore, in monopoly, there is no
distinction between an organization and industry as one organization
constitutes the whole industry.
For example, Iraq and Iran have monopoly on oil wells and South
Africa has monopoly of diamonds. Such monopolies are termed as raw
material monopolies. These monopolies can also arise due to specific
knowledge about a technique of production. For example, Japan and
China have monopoly in electronic goods industry.
Monopolistic Competition:
The term monopolistic competition was given by Prof Edward H.
Chamberlin of Harvard University in 1933 in his book Theory of
Monopolistic Competition. We have discussed the concepts, perfect
competition and monopoly. However, the real market situation is just
the middle way between these two extreme market conditions.
v. Price Policy:
Affects the market prices of a product. Similar to monopoly, average
and marginal revenue curves of an organization also slopes downward
in case of monopolistic competition. This implies that an organization
can sell more only in case it lowers down the prices of its products. On
the other hand, under monopolistic competition, if the prices of
products are higher, then the buyers would switch to other sellers due
to close substitutability of products. In such a scenario, the
organization would not be able to sell more. Therefore, organizations
do not enjoy complete control over price in monopolistic competition.
Oligopoly:
The term oligopoly has been derived from two Greek words, oligoi
means few and poly means control. Therefore, oligopoly refers to a
market form in which there are few sellers dealing either in
homogenous or differentiated products. In India, the aviation and
telecommunication industries are the perfect example of oligopoly
market form.
The aviation industry has only few airlines, such as Kingfisher, Air
India, Spice Jet, and Indigo. On the other hand, there are few
telecommunication services providers, including Airtel, Vodafone,
MTS, Dolphin, and Idea. These sellers are closely interdependent to
each other. This is because each seller formulates its own pricing
policy by taking into account the pricing policies of other competitors
existing in the market.
v. Lack of Uniformity:
Refers to another important characteristic of oligopoly. In oligopoly,
organizations are not uniform in their sizes. Some organizations are
very large in size while some of them are very small. For example, in
small car segment, Maruti Udyog has the share of 86%, while Tata and
Cielo have very low market share.