US primary market structures - Essay Example

US Primary Market Structures Introduction The kind of market structure in which governs an industry has a great implication on the operation of that certain sector. Market structure identifies how a market is in terms of number of competing firms in the industry, the nature of products produced, the degree of monopoly each firm has, the degree to which firm can influence price, profit levels, firms behavior, barriers to entry, and the degree of market efficiency. As such market structure refers to the state of market or an industry with respect to competition (Market Structure 1).

Market structure is important in determining the degree of competition in an industry thereby enabling us to know how this rivalry affects a customer. The market structure of an industry is also a good indication of how each individual firm behaves which also affects their overall performance. For example, in a perfectly competitive industry we expect firms to behave more efficiently to reduce cost and maximize earnings. We also expect a high level of consumer surplus and more intense rivalry among players in this market structure.

This paper will identify the primary market structures currently governing the major US industries. We should also note that as market structure deals with only a few number of economic models, which are a representation of the real world situation some models exists which do not exactly exist in reality. Market Structure in US Industries The economy of the United States of America is regarded as a mixed economy which takes into account the important roles played both the government and market.

The American government highlights the importance of private ownership. However, it also considers that some industries are better regulated by the public than private institutions. Due to this, the public sector becomes primarily responsible in the administration of justice, education, the road system, social statistical reporting, and national defense. The government is also an institution which intervenes to correct mechanisms in the economy (The Economy of the United States 9). Provision of utilities was originally a natural monopoly.

As these services are very costly to be provided by a number of firms. Examples of these industries are the electric, water, and telecommunication industries. However, the development of new technologies which drove the provision of these services down encouraged liberalization of the aforementioned industries. Currently, both the water provision and electricity distribution industries have been deregulated by the government which commenced the entry of players in the sector. The same is true with the telecommunication industry.

However, AT&T's (the largest telecommunication operator in the United States) acquisition of the BellSouth is regarded as a "recreation" of a monopoly in the telecommunication industry (Jivkuv & Mesure 1-2). The acquisition further strengthens the operation of AT&T in the United States thereby outdoing its competitors. The large share of AT&T in the electricity industry gives it a significant power of a monopoly. Another prevalent form of market structure in the United States is oligopoly. Oligopoly occurs when there are a few sellers in an industry.

Examples of oligopolistic markets are the music, beverage, computer, television, and movie industries. It should be noted that these industries are characterized by the presence of one or few dominant sellers and a number of smaller competitive fringe. Take the music industry for instance, this is dominated by five major records labels-Warner Music, EMI Group, Universal Music Group (UMG), Bertelsmann Music Group (BMG) and Sony. However, there is also an increasing threat to this music labels as the possibility of the erosion of the market powers of major players can be eroded through the development of the internet technology.

It should be noted that as independent artists are recognizing the possibility of creating their own labels and marketing them directly to buyers, there is a possibility that the music industry will be a more competitive market for players. Perfect competition is more apparent in the agricultural sector. Production of agricultural commodities like poultry, livestock, wheat, apple and others are mostly carried out by small producers who cannot significantly influence the level of prices. The trade liberalization brought about by a more global integration together with other government programs boost competition in these industries.

However, it should also be noted that competition in this sector taking the dairy industry as an example is being limited by the consolidation of players (Bailey 1). This will create larger players in terms of production thereby giving them more market dominance. Conclusion The industries in the United States have diverse market structures. It should be noted that most highly capital and cost intensive industries are regulated by the government; most agricultural commodities are relatively more competitive.

It is also worth mentioning that these markets structures have evolved due changing circumstances and will continue to be modified due to other economic factors. References Bailey, Ken. US Market Structure: The Dairy Industry in the 21st Century. 14 July 2002. International Association of Milk Control Agencies. 24 March 2006 < http://ffsn.wsu.edu/documents/FutDairyUS.pdf> Jivkuv, Michael & Mesure, Susie. AT&T deals with BellSouth recreates Eighties US Monopoly. 06 March 2006. Independent News and Media Limited.

24 March 2006 < http://news.independent.co.uk/business/news/article349577.ece> Market Structure. Market Structure. Wikipedia: The Free Encyclopedia. 7 October 2005. Wikimedia Foundation, Inc. 24 March 2006 The Economy of the United States. Wikipedia: The Free Encyclopedia. 7 October 2005. Wikimedia Foundation, Inc. 24 March 2006 < http://en.wikipedia.org/wiki/Economy_ of_the_United_States#Regulation_and_control