In modern economics, the types of market structures are divided according to the form and degree of freedom. Each type has its advantages and disadvantages.
The following main types of market structures are distinguished in the economy. The first of these is perfect competition - this is a market in which a huge number of small firms operate. They, as a rule, are engaged in the production of the same products. Therefore, they do not have the ability to independently control prices. An example of such markets may be the fish, agricultural products, or securities markets. All types of market structures have their own characteristics. Features of perfect competition:
1) Advertising is useless.
2) In order for another seller to join the production of similar products, there are no barriers.
3) The number of buyers in this market, as well as sellers, is great.
The second type of market structure - this is monopolistic competition - is a market in which small firms produce the same products, but, nevertheless, have the ability to control prices for them. In order for a manufacturer to be able to raise the price of his product, he needs to surpass his competitors in something. This may be product quality or customer service. An important role in this is the provision of warranty service, the presence of which allows the seller to increase the price of his product. Also, location can be attributed to an increase in cost, because people will walk more often in a cafe near the house than in the one located three blocks further. In this type of market structure, if there is still a difference from the products of its competitors, it is necessary to advertise to inform consumers about this.
Classification of market structures occurs by the number of firms present in this market. For example, the third type, that is, oligopoly, is a market owned by several large firms. This is because the barriers to entry in this industry are quite high. They are:
1) The huge starting capital needed to start the production of goods.
2) Trade secret.
3) The need to comply with copyright or patent law.
4) Mandatory production license.
Prices for goods in the oligopoly are established on the basis of price leadership. And competition takes place around consumer properties of goods. Huge amounts of money are being spent on advertising. Examples of such markets include the computer market, the market for perfumes, automobiles, oil and telephones.
Types of market structures are distinguished on the basis of various signs and traits. So the fourth type is a monopoly, that is, a market belonging to a single seller of a product that has no analogues. This type of market structure is not beneficial to consumers, since the monopolist is not interested in improving the quality of its product and its diversity, in addition, it has the ability to set inflated prices. Entrance to such a market is blocked. Advertising to a monopolist is not necessary, since everyone knows about his product.
