What determines the type of market structure. Market structures: types and defining features. market power. Perfect competition, its essence and meaning

There are four types market structures Keywords: monopoly, oligopoly, pure (perfect) competition, monopolistic competition.

In a systematic way, the characteristics of the main types of competitive structure (models) of markets can be given in the form of a table.

Character traits ___________ Market model ________________________________________________________________ Pure competition Monopolistic competition Oligopoly Pure monopoly Number of firms very large number A lot of Several One ___________ Product types Standardized Differentiated Standardized or differentiated Unique (has no close substitutes) Price control Not Some, but within narrow limits Limited by mutual dependency; significant in conspiracy Significant Conditions for entering the industry Very light, no obstruction Relatively light Presence of significant barriers Industry entry blocked Non-price competition Not Significant emphasis on advertising, trademarks and brands, etc. Typical, especially in product differentiation Mainly advertising Examples Agriculture, stock exchange, foreign exchange market Retail, production of clothes, shoes Steel production, automobiles, household appliances Local utilities

Perfect Competition- competition economic entities in a product market in which none of them has sufficient market share to influence the price of the product. Since the model of perfect competition is a theoretical abstraction, all real markets are imperfect to some extent.

Imperfect Competition- this is when two or more sellers, having limited control over the price, compete with each other for sales. There are several types of markets with imperfect competition (in order of decreasing competition): monopolistic competition, oligopoly, monopoly.

Consider the main types of markets, the main difference of which is the number of sellers and their ability to control prices. AT real life there is no pure (perfect) or only "pure" monopoly under imperfect competition. Perfect Competition and "pure" absolute monopoly are two polar market situations. The perfect competition model is characterized by five features:

1. the presence of many sellers and buyers;

2. the goods are homogeneous and not one of the sellers can stand out with the special properties of their products;

3. the impossibility of influencing the market price, since none of the sellers or buyers has a significant market share;

4. free entry and exit from the market;

5. maximum availability of information about prices and products.

Perfect or pure competition in a market economy, however, cannot solve many issues:

1. rational distribution of income;

2. development of important areas of the economy (defense, training, state environment etc.).

Monopoly- type of industry market in which there is a single seller of a product that does not have close substitutes. The monopolist exercises control over the price and volume of output, which allows him to receive monopoly profits. With a monopoly, there are prohibitively high barriers to entry into the industry.

There is the concept of natural monopoly, which is economic entities that have at their disposal or management rare and not freely reproducible wealth or services - land, minerals, gas, electricity, etc.

Random, temporary monopolies are created in conditions when it becomes possible to manufacture or sell a certain type of product or to have the best factors of production - equipment, technology, labor.

Strength monopoly power individual firm, however, should not be exaggerated. Even a pure monopoly has to reckon with potential competition. This competition may intensify due to innovations, the possible emergence of substitute products, and competition from imported goods.

Along with the monopoly on the part of the producers, there is a monopoly on the part of the buyer - monopsony. A monopsonist buyer is interested and has the opportunity to buy goods at the lowest price (for example, the military industry). Much more often, the monopsonic advantage is realized in local markets.

Bilateral monopoly- This is a market structure when a monopolist is opposed by a monopsonist (a single seller faces a single buyer).

Quasi-monopoly markets are markets in which monopoly power exists at a relatively low concentration of sellers. A monopole is characterized by the following features:

presence of one manufacturer (buyer);

lack of close substitutes for the product;

The presence of high barriers to entry (usually of an artificial nature).

A natural monopoly is characterized by:

positive economies of scale in the long run due to technological reasons;

presence of one (two) profitable (large) firms in the industry;

It is possible that there are other firms that are unprofitable in the long run;

unregulated profitable pricing of large firms;

unprofitable marginal pricing.

Oligopoly is a market structure dominated by a small number of sellers, and the entry of new producers into the industry is limited by high barriers.

The characteristics of an oligopoly include:

1. few firms in the industry (usually no more than ten);

2. high barriers to entry into the industry. They are associated primarily with economies of scale (scale effect), which acts as the most important reason for the widespread and long-term preservation of oligopolistic structures. Oligopolistic concentration is also generated by other barriers: patent monopoly, as happens in knowledge-intensive industries; control over rare sources of raw materials; high advertising costs (as in the production of cigarettes, soft drinks or show business);

3. universal interdependence. An oligopoly occurs when the number of firms in an industry is so small that each of them has to take into account the reaction of competitors in formulating its economic policy.

The oligopoly market is divided into two types: the first type of oligopoly is industries with completely homogeneous products and a large size of enterprises. The second type of oligopoly is a market of several sellers selling goods of different quality.

There are three types of oligopolistic behavior:

1. secret oligopoly;

2. oligopoly dominated;

3. monopolistic competition.

In the first case, when the oligopolists collude, the market price will correspond to the situation of a single monopolist. In the second case, when a large firm in the industry controls 60-80% of the industry's sales volume, several lines of behavior are possible. In the third case, there are many sellers and buyers, free entry and exit from the industry, and each firm does not directly affect the prices of other firms. This type of behavior is closer to a perfectly competitive market.

Depending on whether the product is differentiated or not, an oligopoly is distinguished with a differentiated and standard product. There are also oligopolies with a dominant firm, which are characterized by the presence of a dominant firm - an agent that sells or buys a significant share of the total market.

In the conditions of oligopolistic structures, two main forms of behavior of firms are possible: non-cooperative and cooperative. In the case of non-cooperative behavior, each seller independently solves the problem of determining the price and volume of output. If firms believe that lowering prices will help them force a competitor out of the market, then a price war begins between them. A price war is a cycle of gradually lowering the existing price level in order to force competitors out of an oligopolistic market. The decline in prices will continue until the price falls to the level of marginal cost, that is, it becomes the same as in conditions of perfect competition. The economic profit in this case will be equal to zero.

The desire of oligopolists to cooperative behavior contributes to the formation of cartels, coordinating their decisions about prices and volumes of production as if they had merged into a pure monopoly. There is also a tacit agreement (such as leadership in prices). The price movement in this case occurs in steps, and the leader of the industry (the largest or most technically equipped firm) informs other producers in advance about the upcoming price increase. When making a decision, the leader seeks to make it generally acceptable. Therefore, in industries operating according to this model, the rate of return is not maximum, although it is above average.

The theory of monopolistic competition substantiated by E. Chamberlin. He drew attention to the fact that product differentiation leads to the fact that instead of a single market, a network of separate but interconnected markets is formed, characterized by a variety of prices, costs, output volumes of a particular commodity group. Differentiation does not exclude the monopoly on the product. The power of monopoly, however, does not extend to the broader class of goods of which the monopolized product is a subset.

In the emergence of monopolistic competition in the market, we can say when:

1. there are many competing firms offering differentiated products;

2. each firm has some ability to influence the price at which it sells its goods;

3. there are no barriers to entry and exit to the market;

4. there is an unloaded capacity.

This type market competition occurs in industries where:

1. to exercise production activities no need to create special large enterprises and therefore the organization of firms does not require large investments;

2. it is possible to create varieties of goods that satisfy a specific need;

3. The rights of an individual firm to exclusively manufacture the variety of product it has created can be protected by copyright and trademark rights.

Typical examples of such commodity markets are the markets for food, clothing, furniture, etc.

structure market commodity indicator

Market structure is a complex concept with many facets. It can be determined by the nature of the objects of market transactions. Market structure can be viewed in terms of the nature of competition.

The actions of various business entities depend on the specific conditions in which they are located. In real life, there are almost an infinite number of such diverse combinations. It seems impossible to analyze all possible multivariance. From the infinite variety of the concrete, economic theory singles out and explores several basic, most characteristic situations that develop in the market. As a rule, four types of market structures are distinguished:

• - pure (perfect) competition;
• - pure monopoly;
• - monopolistic competition;
• - oligopoly.

Perfect competition is the state of economic entities in the commodity market, in which none of them has a large enough market share to influence the price of the product. Since the model of perfect competition is a theoretical abstraction, all real markets are imperfect to some extent.

Imperfect competition is a characteristic of a market where two or more sellers, with some (limited) price control, compete for sales. In theory, there are different kinds markets with imperfect competition (in order of decreasing competitiveness): monopolistic competition, oligopoly, monopoly.

The main difference between all types of market structures from the point of view of economic science is how many sellers are on the market and what opportunities it has in terms of forming market prices.

In real life, there is no only pure (perfect) or only "pure" monopoly with imperfect competition. Perfect competition and "pure" absolute monopoly are two polar market situations.

Perfect competition means, firstly, that there are many independent firms on the market, independently deciding what to create and in what quantities. Secondly, no one and nothing restricts access to the market and the same entrance to it to everyone. This implies the opportunity for every citizen to become a free entrepreneur and apply his labor and material resources in the sector of the economy that interests him. Buyers must be free from discrimination and be able to buy goods and services in any market. Thirdly, products for a specific purpose are identical in terms of their most important properties (not differentiated). Fourth, firms have no part in controlling market prices.

These seemingly simple conditions are rarely met in practice. Even a completely identical product may appear heterogeneous to buyers due to, for example, the location of the point of sale, terms of service, advertising, packaging features, and the like. In fact, perfect competition is a rather rare case, and only some of the markets come close to it (the market for grain, securities, foreign currencies). But in relation to Russian activities, even these markets cannot be said to be close to perfect competition.

Monopolistic competition arises where dozens of firms operate, collusion between which is practically impossible. Each firm acts at its own risk and determines its own pricing policy. It is almost impossible to predict and take into account the actions of all other participants in the competitive process. Monopolistic competition develops where product differentiation is necessary, where it is necessary to take into account the tastes of the consumer to a greater extent when marketing their products. In conditions of monopolistic competition, there are no high barriers to entry into the industry. True, this does not mean that there are none at all. These may be licenses, patents, trade marks or trademarks.

The theory of monopolistic competition was developed by E. Chamberlain. He drew attention to the fact that product differentiation leads to the fact that instead of a single market, a network of partially isolated but interconnected markets is formed, there is a wide variety of prices, costs, output volumes of a particular commodity group. Differentiation does not exclude the monopoly on the product. The power of monopoly, however, does not extend to the broader class of goods of which the monopolized product is a subset.

At the same time, the presence on the market of similar substitute products limits the firm's ability to raise prices. When there are similar products on the market, consumers are very sensitive to their price.

Thus, we can talk about the emergence of monopolistic competition in the market when:

• - there are many competing firms in the market offering differentiated products;
• - each firm has some ability to influence the price at which it sells its goods;
• - there are no barriers to entry and exit to the market;
• - there is an unloaded capacity.

This type of market competition occurs in industries where:

• - for the implementation of production activities, it is not necessary to create especially large enterprises, and therefore the organization of firms does not require very large funds;
• - it is possible to create many varieties of goods that satisfy a specific need;
• - the rights of individual firms to the exclusive production of the created variety of goods can be protected by copyright.

Typical examples of this kind of commodity markets are the markets for food, clothing, furniture, and so on.

An oligopoly is a type of market structure in which a small number of sellers operate. Very significant barriers prevent new firms from entering the market.

The oligopolistic type of market structure is characterized by the following features:

• - the presence on the market, in the industry of a small, insignificant, relatively small number of manufacturers, sellers of a certain type of product;
• - products can be both standardized and differentiated;
• - entry into the industry is difficult;
• - the behavior of each competitive firm depends on the reaction of competitors.

In contrast to the types of markets discussed above, an oligopoly implies the presence of a small number of competing firms, which is determined by the necessary economies of scale from the effect of scale in the production of a particular type of product, which reduces costs per unit of product. The minimum efficient scale is so large that there are only a few firms operating in the market that achieve these indicators. An industry cannot have more producers of a particular product. For each industry, each market for a certain type of product, the concept of scarcity, as well as the assessment of economies of scale, will be specific.

In this regard, an important characteristic of the oligopolistic structure is the concentration of the market. This category reflects the degree of dominance in the market by one or more firms. Each industry has its own level of concentration. In practice, various indicators are used to measure this process. One is the concentration ratio, which shows the percentage of all industry sales, or the share of total industry sales, attributable to the top three firms.

For an oligopolistic market, it does not matter whether standardized or differentiated products are brought to the market. A number of goods (eg metals) are standardized, and many (eg cigarettes, food, household appliances) can be differentiated.

Entry into the industry in an oligopolistic market model is difficult. And one of the reasons is economies of scale. The entry and functioning of new competitors dictates that they have the same scale to achieve efficiency. Possible expansion involves the displacement or absorption of existing firms and leads to their reduction. It is appropriate to assume that such large producers already own certain patents or licenses, they have the exclusive right to sources of raw materials and other factors of production. They have access to significant financial costs for large-scale advertising companies. Of course, this creates additional difficulties for entering a particular market.

The change in the scale of production is very often associated with integration. Integration is the unification of technologically homogeneous industries (horizontal integration) or industries that form a single technological chain, from the extraction of raw materials to the production of finished products (vertical integration). Horizontal integration produces economic benefits through common R&D, joint sales and repair services, joint advertising efforts, and so on. Vertical integration, in addition, provides savings from reducing the cost of conducting market operations, ensures the reliability of sales and supplies.

The presence and level of industry barriers characterize the probability of new competitors appearing in the industry and the old ones exiting it. Barriers to entry arise when some labor or asset is available to only a few competitors. Access to sources of capital is rarely a barrier to entry, as raising capital is usually easy. On the other hand, limited access to new technologies and patents, when such technologies are owned by only a handful of scientists, can become an insurmountable obstacle for new competitors. Barriers to exit arise when competitors are better off staying in the industry even if their profits do not cover the cost of capital. Barriers to exit are often found in capital-intensive industries in which firms earn more than their marginal cost and are therefore reluctant to exit despite very low returns on capital. Moreover, company leaders sometimes continue to invest in low-margin industries for a long time because they do not want to close their organization or hope that someone else will be the first to leave the industry.

Existing restrictions in this process determined by the possibility of merging existing producers. The forms of such associations can be very diverse - from cartel agreements to concerns. A cartel is an association of firms coordinating their decisions about prices and volumes of production as if they had merged into a pure monopoly. The basis of the merger may also be the small number of producers in a given market, which forms a prerequisite for an agreement; and the desire to increase economies of scale in production; and already achieved economies of scale, which provided economic power in the market, and now realized in the merger of competitors. These factors, of course, make it difficult and limit the entry of new competitors into the industry.

The most important characteristic, distinctive feature of the oligopolistic market, which stems largely from the small number of functioning participants, is the relationship, interdependence between competing firms. Possible changes in sales volume, product quality, prices require consideration of the likely response behavior of not only consumers but also competitors.

Of course, it is extremely important to calculate costs, take into account demand, build a pricing policy, but it is just as important in an oligopoly to anticipate the reaction of other producers operating in the same market. The actions of one objectively cause adequate measures of the other. Each manufacturer, each firm, each seller, when planning their specific steps, must provide for the response of competitors. This interdependence is a special feature, a property characteristic of an oligopolistic market. The response of other market participants is very difficult to predict and introduces an uncertainty factor that plays a significant role in the construction of a firm's behavior model in an oligopoly. The interdependence of producers, possible responses can manifest themselves in a variety of forms - from fierce competition to the development of joint measures, the conclusion of agreements, the merger of firms.

The oligopoly market can be divided into two types: the first type of oligopoly is an industry with a completely homogeneous product and a large size of enterprises.

The second type of oligopoly is a market of several sellers selling goods of different quality.

There are three main types of oligopolistic behavior:

• - a secret oligopoly, when the oligopolists can fully agree, the market price will correspond to the situation of a single monopolist;
• - oligopoly of dominance, when the largest firm in the industry controls 60-80% of the industry's sales volume, several lines of behavior can be chosen;
• - monopolistic competition (it was discussed above), when there are many sellers and buyers, entry and exit from the industry is free, and each firm does not directly affect the prices of other firms. This case is closer to a perfectly competitive market.

A monopoly is a type of industry market in which there is only one seller of a product that has no close substitutes. The monopolist exercises control over the price and quantity of output, which allows him to receive a monopoly profit. With a monopoly, there are prohibitively high barriers to entry into the industry.

Monopoly arises when and where barriers to entry are difficult to overcome. This may be due to economies of scale as well as natural monopoly. Natural monopolists are economic entities that have at their disposal rare and freely non-reproducible material goods or services - land, minerals, gas, electricity, and so on. In this case, the main reason for monopoly is economies of scale or economies of scale.

Random, temporary monopolists that arise due to random circumstances can be created in conditions where there is an exceptional opportunity to manufacture or sell a certain type of product or to have the best factors of production - equipment, technology, labor.

The strength of the monopoly power of an individual enterprise, however, should not be exaggerated. Even a pure monopoly has to reckon with potential competition. This competition may intensify due to innovations, the possible emergence of substitute products, and competition from imported goods.

Along with the monopoly on the part of the manufacturer, there is a monopoly on the part of the buyer - monopsony. A monopsonist buyer is interested and has the opportunity to buy goods at the lowest price (for example, the military industry).

A bilateral monopoly is a market structure where a monopolist is opposed by a monopsonist.

Quasi-monopoly markets are markets in which monopoly power exists at a relatively low concentration of sellers.

Thus, a monopoly can be defined by the following features:

• - the presence of one producer or consumer;
• - lack of close substitutes for the product;
• - the presence of high barriers to entry into the market.

A natural monopoly is characterized by:

• - positive economies of scale in the long run due to technological reasons;
• - the presence of one (two) large firms in the industry;
• - there may be other firms that will be unprofitable in the long run;
• - unregulated profitable pricing of large firms above marginal and average costs.

Market monopolization is an objective economic trend that occurs in the depths commodity production and reflecting the interests of large producers. In a monopolized market, the actions of monopoly producers are contrary to the interests of consumers.

The degree of market monopolization is controlled by Russian legislation, namely the Ministry for Antimonopoly Policy, which is supervised by the First Deputy Prime Minister of the Russian Government. The implementation of state policy to promote the development of commodity markets and competition, prevent, restrict and suppress monopolistic activities and unfair competition is carried out by the federal executive body - the federal antimonopoly body.

Within the national economy government bodies exercise control over the behavior of individual corporations on the market and, through the judiciary, eliminate violations of the law.

In accordance with the Law of the Russian Federation "On Competition and Restrictions on Monopolistic Activities in Commodity Markets", the position of an economic entity whose share in the market of a certain product is 65% or more is recognized as dominant, unless the economic entity proves that, despite exceeding the specified size, its market position is not dominant. The dominant position is also recognized as the position of an economic entity, the share of which in the market of a certain product is less than 65%, if it is established by the antimonopoly authority, based on the stability of the economic entity's share in the market, the relative size of market shares owned by competitors, the possibility of access to this market by new competitors or other criteria characterizing commodity market. The position of an economic entity whose share in the market of a certain product does not exceed 35% cannot be recognized as dominant.

Jumpingtion- this is the rivalry between participants in the market economy for the best conditions for the production, purchase and sale of goods.

Distinguish between perfect and imperfect competition

Perfect Competition- this is the rivalry of numerous manufacturers that create approximately the same volumes of identical (completely replaceable) products.

Imperfect Competition in contrast to the perfect is limited by the influence of monopolies and the state.

There are following models of imperfect competition:

Characteristics of the main market models

Market Model Features	Market Models
	Perfect Competition	Imperfect Competition
		Monopolistic competition	Oligopoly	Pure monopoly
Number of firms	Lots of		Several	One firm
Product type	Homogeneous, standardized	Imaginary or real differentiation	Homogeneous or differentiated	Unique products
Degree of price control	Missing control	Weak, little control	Partial control	High degree of control
Conditions for entering the industry	No restrictions, equal access to information	Relatively easy, satisfactory access to information	Limited access to the market and information	Market access blocked
Non-price competition	Missing		Used to a large extent	Creation of a favorable image of the company
	Farms	Retail trade, production of clothing, footwear, cosmetics, furniture, etc.	Automotive, aviation, chemical, oil, electronics, etc.	Electricity and gas, local telephone companies, etc.

Competition as a factor in the marketing environment

The company operates in the market in a competitive environment. Competition- rivalry of goods and enterprises aimed at capturing attention potential consumers. Competition is the basis of the mechanism of commodity production and the market economy. On fig. 1 shows the main difference between monopoly and competition.

Rice. 1 The difference between competition and monopoly

For the normal functioning of the market in Russian Federation it is necessary to fulfill a number of conditions that will allow creating an appropriate business macro environment:

1. Investments in the development of small and medium-sized businesses and benefits for their organization.
2. Special customs policy.
3. Dismemberment of monopoly structures and the effect of antimonopoly legislation.

All these decisions must have a clear legal basis.

There are several types of competitive structures, the specifics of which must be taken into account when creating and implementing marketing programs for enterprises operating in a particular type of structure.

I. occurs when a company manufactures a product for which there is no substitute.

1. Due to the fact that the enterprise has no competitors, it completely controls the supply of these products and, as the only seller, can create barriers for potential competitors.
2. AT real world monopolies that exist to this day are some organizations for the provision of utilities, such as electricity and cable transmission of information, they are largely regulated by government agencies. The existence of natural monopolies is allowed, since their development and operation require gigantic financial resources; a small number of organizations may concentrate such resources to, for example, compete with a local electric company.
3. The main goal of marketing in a monopoly is to control the market and maintain the uniqueness of the product.

II. occurs when a small number of suppliers control a significant proportion of the supply of products. In this case, each of the suppliers must take into account the reactions of other suppliers to changes in market activity.

1. Products produced by oligopolies can be homogeneous, such as aluminum, or differential, such as cigarettes and cars.
2. For example, because of the huge financial outlay required, very few businesses can afford to enter the oil refining or steel market.
3. Some industries require a certain level of technical and marketing skills, which is an insurmountable barrier for many potential competitors.
4. Enterprises in the oligopolistic market try to avoid price wars due to the fact that such an approach is costly for everyone involved in the war.

III. occurs when a firm's potential competitors attempt to develop a differential marketing strategy in order to capture a part of the market.

1. There are several firms, but a different marketing structure, although the products are similar.
2. There is a possibility of market penetration, since the initial costs are not very high.

3. Important distinctive features goods.

IV., if it existed at all, would mean that there are a large number of sellers, none of whom can have a significant impact on price or supply.

1. The products would be homogeneous and there would be full knowledge of the market and smooth entry into the market.
2. The closest example to perfect competition is the unregulated agricultural market.
3. Very few (if any) marketers work in a purely competitive environment.
4. Pure competition is conditionally one pole of the market structure, and monopoly is the opposite.
5. Most marketers work in a competitive environment that could roughly be placed somewhere between these two extremes.
6. The market of each enterprise with this type of competition is small, the demand is elastic. It is easy to enter this market.

Types of competition:

1. Functional competition- different products can satisfy the same need.
2. Species competition- better satisfies the need for a product with higher consumer qualities.
3. Interfirm competition- the advantage in the market is the one who better captured the attention of potential consumers. Success on modern market has an enterprise that was able to provide a variety of assortment of manufactured goods and services offered, increase the value of consumer properties of products while slightly increasing the price of it, concentrating its efforts on creating new segments and new market niches.

There are also two main groups of competition methods: price, non-price.

Under the market structure, it is customary to understand the totality of many specific features and traits that reflect the characteristics of the organization and functioning of a particular industry market. The concept of market structure reflects all aspects of the market environment in which the company operates - this is the number of firms in the industry, the number of buyers in the market, the characteristics of the industry product, the ratio of price and non-price competition, the market power of an individual buyer or seller, etc. Theoretically, market structures can be large. Nevertheless, many economists consider it possible to simplify the analysis by resorting to a typology of market structures based on several basic parameters- signs of the branch market.

1. Number of firms in the industry. The presence or absence of an individual firm's ability to influence the market equilibrium will depend on the number of sellers operating in a given industry market. Other equal conditions, with a large number of firms in a given market, any attempts by an individual firm to influence market supply by reducing or increasing individual supply will not lead to any significant changes in the market equilibrium. In this case, the market share of each particular firm is insignificant. A different situation will arise when the market share of the firm is large, i.e., one or more large firms operate in this market. Such a firm has the opportunity to influence the market supply, and hence the market equilibrium and market price.

2. Control over the market price. The degree of control of an individual firm over price is the most striking indicator of the level of development of competitive relations in the industry market. The greater the individual producer's control over price, the less competitive the market is.

3. The nature of the products sold on the market- A standardized or differentiable product is produced by an industry. Product differentiation means that in a given market different firms offer products designed to satisfy the same need, but differ in different parameters. There is such a dependence here: the higher the degree of differentiation (heterogeneity) of industry products, the more the company has the opportunity to influence the price of its goods and the lower the degree of competition in the industry. The more standardized (homogeneous) an industry product is, the more competitive the market is.

4. Conditions for entering the industry, which is associated with the presence or absence of barriers to entry into the industry. The presence of such barriers will prevent the entry of new firms into a given industry market and, consequently, the development of industry competition.

5. Presence of non-price competition. Non-price competition takes place if the industry product is differentiable. Non-price competition - competition in terms of Quality of products, services, location and availability, and advertising.

Depending on the content of each feature and their combination, different types of industry markets (different market models) are formed - perfect competition, monopolistic competition, oligopoly and pure monopoly.

Based on the presented characteristics, it is possible to give definitions of various types of market structures:

perfect competition- a model of the market, which is characterized by price competition between manufacturers of standardized products that are unable to influence the market equilibrium and the market price. A market structure that does not meet at least one of the conditions of perfect competition is an imperfectly competitive market. Markets of imperfect competition, in turn, are represented by markets of pure monopoly, monopolistic competition, oligopolistic markets;

pure monopoly- a type of market structure characterized by a lack of competition, which implies dominance in the market closed by entry barriers of one firm that produces a unique product and controls the price;

monopolistic competition- a type of market structure in which sellers of differentiated products compete with each other for sales volumes, and non-price competition acts as the main reserve for achieving a competitive advantage in the market;

oligopoly- a type of market structure in which several interdependent and often interacting firms compete with each other for market share (sales volumes).

Each of these market structures is distinguished by a different degree of market power of an individual producer, which is inversely related to the degree of development of competitive relations in the market. market power- the ability of a producer or consumer to influence the situation on the market, primarily on the market price. If market power is manifested on the demand side, then we should talk about the market power of the buyer. Bargaining power of the producer It consists in the presence or absence of the opportunity for him to influence the industry (market) price of manufactured products by changing output volumes. The market power of an individual seller will be determined by the peculiarities of the organization of the market structure and will depend on the following factors:

Shares of the given firm in the industry-wide offer. The greater the share of a given firm in the market supply, the more opportunities it has, by changing its own supply, to influence the industry-wide (market) supply, and hence the market price;

Degrees of price elasticity of demand for the firm's products. The less elastic demand is, the less the company fears a negative reaction from consumers of its products, the more opportunities it has for price maneuver, the higher its market power;

Availability this product substitutes, since the more substitutes a product has, the higher the price elasticity of demand. A high elasticity will limit the bargaining power of a given firm;

Features of the interaction of firms operating in the industry, which can cause the emergence of market power among manufacturers operating in the industry. This situation is possible if firms can collude and reach an agreement on the division of the market and on the market price.

The main sources of market power have been identified above. The specific conditions for the functioning of firms under perfect competition, pure monopoly, monopolistic competition and oligopoly are characterized by a different ratio of these factors, which, in turn, gives rise to the absence or presence of market power, as well as the degree of influence of an individual producer on the market situation.

Note. The market power of an individual producer in an industry lies in the ability to influence the market price of a product (P x ). Assume that a certain firm has market power (is a monopoly) and can influence the industry price. It turns out that this firm will not be able to arbitrarily set the price P X . As you know, the price is set as a result of the interaction of market demand and supply. By reducing or expanding its individual supply, a firm with market power can influence industry supply, but not industry demand. Market demand will be determined by the operation of the law of demand and is functionally independent of the behavior of the firm, even if it has market power. Thus, the ability of an individual firm to influence the industry price will be limited by market demand. A firm with market power is limited in choosing a price for its products and the following circumstance. In an effort to maximize profits, the firm is forced to choose the appropriate volume of production for each price level, looking for a combination of "price-output volume" that provides it with profit maximization.

The degree of market power can be quantified. For this, the so-called Lerner coefficient is used, which is defined as the ratio of the excess of the firm's price over its marginal cost to the price of the goods: L = (P X -MC ) / PX

The values ​​of the coefficient are calculated in absolute terms, and O< L < 1. В условиях совершенной кон­куренции, когда ни одна из действующих на рынке фирм не обладает рыночной властью, L = 0. В условиях чистой монопо­лии, когда на рынке действует единственный производитель, обладающий фактически абсолютной рыночной властью, L= 1.

	Market Models
Characteristic	Perfect Competition	Imperfect Competition
		Monopolistic competition	Oligopoly	Pure monopoly
Number of firmsinindustries	Lots of	A lot of	Several	One
Control over the market price	Missing	Some, but within narrow limits	Limited by mutual dependence, but significant in case of collusion of firms and cartelization of the industry	Significant, monopolist dictates prices
Product Description	Standardized item	differentiated product	differentiated or standardized	Unique
Conditions for entering the industry	There are no entry barriers	Relatively light	Industry entry blocked
Presence of non-price competition	Missing	The main reserve for increasing revenue and obtaining economic profit	Typical, especially for industries producing a differentiable product	Atypical. May resort to advertising as part of public relations activities

The market economy is a complex and dynamic system, with many connections between sellers, buyers and other participants in business relations. Therefore, markets, by definition, cannot be homogeneous. They differ in a number of parameters: the number and size of firms operating in the market, the degree of their influence on the price, the type of goods offered, and much more. These characteristics define types of market structures or otherwise market models. Today it is customary to distinguish four main types of market structures: pure or perfect competition, monopolistic competition, oligopoly and pure (absolute) monopoly. Let's consider them in more detail.

The concept and types of market structures

Market Structure- a combination of characteristic industry features of the organization of the market. Each type of market structure has a number of characteristics that are characteristic of it, which affect how the price level is formed, how sellers interact in the market, and so on. In addition, the types of market structures have varying degrees of competition.

Key characteristics of types of market structures:

• the number of sellers in the industry;
• firm sizes;
• number of buyers in the industry;
• type of goods;
• barriers to entry into the industry;
• availability of market information (price level, demand);
• the ability of an individual firm to influence the market price.

The most important characteristic of the type of market structure is level of competition, that is, the ability of a single seller to influence the general market situation. The more competitive the market, the lower this possibility. Competition itself can be both price (change in price) and non-price (change in the quality of goods, design, service, advertising).

Can be distinguished 4 main types of market structures or market models, which are presented below in descending order of the level of competition:

• perfect (pure) competition;
• monopolistic competition;
• oligopoly;
• pure (absolute) monopoly.

A table with a comparative analysis of the main types of market structures is shown below.

Table of the main types of market structures

Perfect (pure, free) competition

perfect competition market (English "perfect competition") - characterized by the presence of many sellers offering a homogeneous product, with free pricing.

That is, there are many firms on the market offering homogeneous products, and each selling firm, by itself, cannot influence the market price of this product.

In practice, and even on the scale of the entire national economy, perfect competition is extremely rare. In the 19th century it was typical for developed countries, but in our time, only agricultural markets, stock exchanges or the international currency market (Forex) can be attributed to markets of perfect competition (and even then with a reservation). In such markets, a fairly homogeneous product (currency, stocks, bonds, grain) is sold and bought, and there are a lot of sellers.

Features or conditions of perfect competition:

• number of sellers in the industry: large;
• size of firms-sellers: small;
• goods: homogeneous, standard;
• price control: none;
• barriers to entry into the industry: practically absent;
• competitive methods: only non-price competition.

Monopolistic competition

Monopolistic competition market (English "monopolistic competition") - characterized by a large number of sellers offering a diverse (differentiated) product.

In conditions of monopolistic competition, entry to the market is fairly free, there are barriers, but they are relatively easy to overcome. For example, in order to enter the market, a firm may need to obtain a special license, patent, etc. The control of firms-sellers over firms is limited. The demand for goods is highly elastic.

An example of monopolistic competition is the cosmetics market. For example, if consumers prefer Avon cosmetics, they are willing to pay more for it than for similar cosmetics from other companies. But if the price difference is too big, consumers will still switch to cheaper counterparts, such as Oriflame.

Monopolistic competition includes markets for food and light industry, the market of medicines, clothes, footwear, perfumery. Products in such markets are differentiated - the same product (for example, a multi-cooker) from different sellers (manufacturers) can have many differences. Differences can manifest themselves not only in quality (reliability, design, number of functions, etc.), but also in service: availability warranty repair, free shipping, technical support, payment by installments.

Features or features of monopolistic competition:

• number of sellers in the industry: large;
• size of firms: small or medium;
• number of buyers: large;
• product: differentiated;
• price control: limited;
• access to market information: free;
• barriers to entry into the industry: low;
• competitive methods: mainly non-price competition, and limited price.

Oligopoly

oligopoly market (English "oligopoly") is characterized by the presence on the market of a small number big sellers, the goods of which can be both homogeneous and differentiated.

Entry into the oligopolistic market is difficult, entry barriers are very high. The control of individual companies over prices is limited. Examples of an oligopoly are the automotive market, cellular communication, household appliances, metals.

The peculiarity of an oligopoly is that the decisions of companies about the prices of a product and the volume of its supply are interdependent. The situation on the market strongly depends on how companies react when the price of products is changed by one of the market participants. Possible two kinds of reactions: 1) follow reaction– other oligopolists agree with new price and set prices for their goods at the same level (follow the price change initiator); 2) reaction of ignoring- other oligopolists ignore price changes by the initiating firm and maintain the same price level for their products. Thus, an oligopoly market is characterized by a broken demand curve.

Features or oligopoly conditions:

• number of sellers in the industry: small;
• size of firms: large;
• number of buyers: large;
• goods: homogeneous or differentiated;
• price control: significant;
• access to market information: difficult;
• barriers to entry into the industry: high;
• competitive methods: non-price competition, very limited price competition.

Pure (absolute) monopoly

Pure monopoly market (English "monopoly") - characterized by the presence on the market of a single seller of a unique (having no close substitutes) product.

Absolute or pure monopoly is the exact opposite of perfect competition. A monopoly is a one-seller market. There is no competition. The monopolist has full market power: it sets and controls prices, decides how much goods to offer to the market. In a monopoly, the industry is essentially represented by just one firm. Barriers to market entry (both artificial and natural) are almost insurmountable.

The legislation of many countries (including Russia) fights against monopolistic activity and unfair competition (collusion between firms in setting prices).

Pure monopoly, especially on a national scale, is a very, very rare phenomenon. Examples are small settlements(villages, towns, small towns), where there is only one store, one owner public transport, one Railway, one airport. Or a natural monopoly.

Special varieties or types of monopoly:

• natural monopoly- a product in an industry can be produced by one firm at a lower cost than if many firms were engaged in its production (example: public utilities);
• monopsony- there is only one buyer in the market (monopoly on the demand side);
• bilateral monopoly- one seller, one buyer;
• duopoly– there are two independent sellers in the industry (such a market model was first proposed by A.O. Kurno).

Features or monopoly conditions:

• number of sellers in the industry: one (or two, if we are talking about a duopoly);
• company size: various (usually large);
• number of buyers: different (there can be both a multitude and a single buyer in the case of a bilateral monopoly);
• product: unique (has no substitutes);
• price control: full;
• access to market information: blocked;
• barriers to entry into the industry: virtually insurmountable;
• competitive methods: absent as unnecessary (the only thing is that the company can work on quality to maintain the image).

Galyautdinov R.R.

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