Monopolistic_Competition_vs._Oligopoly

Maria Gonzalez Perfect competition, monopoly, monopolistic competition and oligopoly are the four primary market types. Perfect competition: is a market structure with many well-informed sellers and buyers of an identical product and no barriers to entering or leaving the market. (Slavin, 2011) This market is made up of buyers and sellers trading in uniform goods like cooper or wheat. No one seller or buyer have a significant effect on the ongoing market price. The seller may not change more than the going price, because the buyer can buy as much as they must have at the going price. An example of this would be: The farming industry, in this region many farmers produce their products to sell it to the government at a fixed price, given then no freedom to change the price. In the perfect competition market there is minimum or no need for using marketing research, sales promotions or advertisement. Therefore, in this market there is little need to spend much time on marketing strategy. Monopoly is a firm that produces all the output in an industry. (Slavin, 2011) .Therefore, the solitary business is the industry. Access into such a market is limited due to high costs or other obstacles, which may be social, political or economic. For example, a government can generate a monopoly over an industry that it wishes to control, such as oil. Additional reason for the obstacles in contrast to entering into a monopolistic industry is that oftentimes, one entity has the exclusive rights to a natural resource. For instance, in Saudi Arabia the government has exclusive control over the oil industry. A monopoly may also form when a firm has a copyright or patent that stops others from entering the market. Oligopoly: An industry with just a few firms. (Slavin, 2011) These main groups of firms have control over the price and, like a monopoly; an oligopoly has extraordinary obstacles in order enter. The goods that the oligopolistic firms create are often practically alike and, consequently, the firms, who are competing for market share, are mutually dependent as a result of market forces. For instance, let’s say that the government needs only 1000 tankers. Company T will produce 500 tankers and its competitor, Company M, will produce the other 500. The prices of the two brands will be dependent causing them to be similar to each other. Therefore, if Company T lowers the price on their tankers, it will receive a greater market share, thus forcing Company M to lower its prices as well on their tankers. Monopolistic competition: An industry that has many firms producing a differentiated product. (Slavin, 2011) In monopolistic competition there are many sellers still, similar to perfect competition. However, the products they sell are not identical. Instead, the products they sell are differentiated or are made to seem slightly different, even though they are made for the same purpose. The products could be differentiated in many different way, for instance they can differ in brand, location, style or even quantity. An example of this would be the soft drink industry; Dr. Pepper, Coke and Pepsi are all similar drinks, but what if one of them raised their price much higher, more than likely consumers would change over to the less expensive brands. Or what if one of the brands decided to have a large promotional and lowered their prices temporally, the consumer could be persuaded to change over temporally while the price is lower. The same could be said of where you buy your gas; you more than likely buy your gasoline at the station nearest to your home regardless of the brand. Nevertheless the loyalty of a customer can be persuaded to a different product, for example, if the station closest to your home raises its price too high, the loyalty of the consumer will be lost to a competitor. Works Cited Slavin, S. L. (2011). Economics. New Youk: McGraw-Hill/Irwin.