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Market Structure - Essay Example

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Market Structures Institution Introduction The theory of market structures seeks to identify the characteristics of demand and supply in different markets or economies under various circumstances. Presumably, the various market structures devolve different characteristics to the price elasticity factors in the market and often affect the economic development and planning programs…
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Market Structure
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Download file to see previous pages Discussion of the market structures Perfect market competition In perfect market competition, economists recite that there are many firms, price takers, and the number of suppliers tends to be equal to the number of suppliers in the market. The reason of its occurrence is the ideology that informative buyers and sellers deal with homogeneous products (Stackelberg, et al 2011). Monopoly market structure The structure leads to the domination of the market by one producer of a certain product whose utility serves the needs of a broad group of clientele thus; the business entity manipulates the supply and pricing utilities and buyers rest to no obligation other than making purchases at different prices per unit of consumption (Oner, 2013). Monopolistic competition The situation occurs when there are many firms in market competing to market their products but often differ as they produce different types of products. The freedom of entry and exit rests upon the buyers and sellers and they obviously lack information thus they live in an imperfectly competitive market (Heywood, 2006). Duopoly market structure The advent of duopoly in a market occurs in the presence of two firms that are interdependent and obviously collude in their bid to execute their programs. There is a possibility of restrained policies to market entrants. The firms also restrain each other seeking to excel profitable through price leadership. Oligopoly market structure This market structure presents varied characteristics since the present firms often compete against each other despite the fact that they show a higher degree of interdependence. There exists the characteristic of non-price competition and an often possibility of collusion among the firms. There are barriers imposed to the new market entrants (Oner, 2013). The Californian market structure The markets pose different ownership structures with some depicting horizontal while others depict vertical structures. Research ascertains that power production utilities in Californian markets are authorized by the government to produce essentially on cost-based approaches rather than regulatory approaches (Stackelberg, et al 2011). However, the distribution of power through transmission rests regulated by the authorities thus ensuring equated supply to meet the existing demand rather than leaving the mandate to the producers who may aim to deliver to consumers who tend to pose higher marginal consumptions over domestic consumers. Arguably, the Californian market structure in the electricity sector seems to be a monopoly as well as a duopoly in that after production of the power by differentiated utilities restrains the entry of new firms. Further, the situation leads to the stipulation of prices in accordance to the will of the producers however, the system of duopoly shifts to oligopoly as the power producing utilities seek to gain abundant benefits while the authorities restrain them from accessing the consumers. Further, monopolistic competition prevails in the energy sector of California since the firms differ in production of energy from coal, hydropower utilities, and nuclear power production mechanisms (Bushnell, Mansur, and Saravia, 2004). Effects of high entry ...Download file to see next pages Read More
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Market structure

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