Four-Firm Concentration Ratio - Assignment Example

The reasons for the difference in the concentration ratios of the two market structures are mainly - 1. Barriers to EntryA monopolistic competition market structure is characterized by a large number of sellers, engaged in selling differentiated products. However, these differences are often found to be perceived in nature. Moreover, the cost of entry in such an industry is also very low, thus making the entry of smaller firms easier and curbing the power of the individual firms of influencing the public.

But, in the oligopolistic market structure, the cost of entry is very high and thus, there is a first-mover advantage, thus enabling such players to have some controlling power over the market. Smaller firms have a very poor chance of entry into such markets. 2. Contestable Market Versus Price Leadership Strategy A monopolistic market structure is characterized by a large number of players and thus, each of them has very little influence over the price structure of their products. However, in an oligopoly market, since the number of large players is few, there are fewer rivals enabling each of them to have some control over their price structures.