Market structure - wikipedia Market structure Economics A supply and demand diagram, illustrating the effects of an increase in demand Index Outline History Branches Classification History of economics Schools of economics Mainstream economics Heterodox economics Economic methodology Economic theory Political economy Microeconomics Macroeconomics International economics Applied economics Econometrics Economic history JEL classification codes Concepts Theory Techniques Economic growth Economic system Experimental economics Mathematical economics Game theory Post-scarcity Market National accounting By application Agricultural Behavioral Business Computational Cultural Demographic Development Digitization Ecological Education Engineering Environmental Evolutionary Expeditionary Economic geography Financial Health Industrial organization Information Institutional Knowledge Labour Law Managerial Monetary Natural resource Organizational Personnel Economic policy Public economics Public / Social choice Regional Rural Service Socioeconomics Economic sociology Economic statistics Urban Welfare Welfare economics Lists Economists Publications ( journals ) Glossary Glossary of economics Business and economics portal In economics, market structure is a descriptive organizational term for discussing the economics of the market and other characteristics of a market. Contents 1 History 2 Types 3 Elements and concerns 4 See also 5 References 6 External links History See also : Laissez - faire Market structure has historically emerged in two separate types of discussions in economics, that of Adam Smith on the one hand, and that of Karl Marx on the other hand. Adam Smith in his writing on economics stressed the importance of laissez - faire principles outlining the operation of the market in the absence of dominant political mechanisms of control, while Karl Marx discussed the working of the market in the presence of a controlled economy sometimes referred to as a command economy in the literature. Both types of market structure have been in historical evidence throughout the twentieth century and twenty - first century. Types The discussion of market structure in free economies as described by Adam Smith is often qualified or discussed in terms of patterns of market organization which serve the buyers and sellers in any particular form of the marketplace. Some types of market structure may be described using several recurrent types of descriptive organizational mechanism which may or may not dominate any particular market over time or at particular points in time, such as ; 1. Monopolistic competition, a type of imperfect competition such that many producers sell products or services that are differentiated from one another ( e.g. by branding or quality ) and hence are not perfect substitutes. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other. This market structure exists when there are multiple sellers who are attempting to seem different than each other. 2. Oligopoly, in which a market is run by a small number of firms that together control the majority of the market share. Duopoly, a special case of an oligopoly with two firms. Monopsony, when there is only a single buyer in a market. Oligopsony, a market where many sellers can be present but meet only a few buyers. 3. Monopoly, where there is only one provider of a product or service. Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the firm. A firm is a natural monopoly if it is able to serve the entire market demand at a lower cost than any combination of two or more smaller, more specialized firms. 4. Perfect competition, a theoretical market structure that features low barriers to entry, identical products with no differentiation, an unlimited number of producers and consumers, and a perfectly elastic demand curve. Elements and concerns The imperfectly competitive structure is quite identical to the realistic market conditions where some monopolistic competitors, monopolists, oligopolists, and duopolists exist and dominate the market conditions. The elements of Market Structure include the number and size distribution of firms, entry conditions, and the extent of differentiation. These somewhat abstract concerns tend to determine some but not all details of a specific concrete market system where buyers and sellers actually meet and commit to trade. Competition is useful because it reveals actual customer demand and induces the seller ( operator ) to provide service quality levels and price levels that buyers ( customers ) want, typically subject to the seller 's financial need to cover its costs. In other words, competition can align the seller 's interests with the buyer 's interests and can cause the seller to reveal his true costs and other private information. In the absence of perfect competition, three basic approaches can be adopted to deal with problems related to the control of market power and an asymmetry between the government and the operator with respect to objectives and information : ( a ) subjecting the operator to competitive pressures, ( b ) gathering information on the operator and the market, and ( c ) applying incentive regulation. Quick Reference to Basic Market Structures Market Structure Seller Entry Barriers Seller Number Buyer Entry Barriers Buyer Number Perfect Competition No Many No Many Monopolistic competition No Many No Many Monopoly Yes One No Many Duopoly Yes Two No Many Oligopoly Yes Few No Many Monopsony No Many Yes One Oligopsony No Many Yes Few The correct sequence of the market structure from most to least competitive is perfect competition, imperfect competition, oligopoly, and pure monopoly. The main criteria by which one can distinguish between different market structures are : the number and size of producers and consumers in the market, the type of goods and services being traded, and the degree to which information can flow freely. See also Industrial organization Microeconomics Economics Herfindahl index Structure - conduct - performance paradigm References Jump up ^ `` AP Economics Review : 4 Market Structures ''. ReviewEcon.com. 2016 - 09 - 10. Jump up ^ Body of Knowledge on Infrastructure Regulation `` Market Structure : Introduction. '' External links Library resources about Market structure Resources in your library Microeconomics by Elmer G. Wiens : Online Interactive Models of Oligopoly, Differentiated Oligopoly, and Monopolistic Competition Microeconomics Major topics Aggregation Budget set Consumer choice Convexity and non-convexity Cost Average Marginal Opportunity Social Sunk Transaction Cost -- benefit analysis Deadweight loss Distribution Economies of scale Economies of scope Elasticity Equilibrium General Exchange Externality Firms Household Income -- consumption curve Information Indifference curve Intertemporal choice Market failure Market structure Duopoly Monopolistic competition Monopoly Bilateral Monopsony Oligopoly Oligopsony Perfect competition Pareto efficiency Preferences Production Profit Public goods Returns to scale Risk aversion Scarcity Shortage Surplus Social choice Supply & demand Uncertainty Utility Expected Marginal Subfields Behavioral Business Computational Statistical decision theory Econometrics Engineering Experimental Game theory Industrial organization Labor Managerial Mathematical Microfoundations of macroeconomics Operations research Optimization Welfare Institutional economics Institutional economists Werner Abelshauser Clarence Edwin Ayres Joe S. Bain Shimshon Bichler Robert A. Brady Daniel Bromley Ha - Joon Chang John Maurice Clark John R. Commons Richard T. Ely Robert H. Frank John Kenneth Galbraith Walton Hale Hamilton Orris C. Herfindahl Albert O. Hirschman Geoffrey Hodgson János Kornai Simon Kuznets Hunter Lewis Jesse W. Markham Wesley Clair Mitchell Gunnar Myrdal Jonathan Nitzan Warren Samuels François Simiand Herbert A. Simon Frank Stilwell George W. Stocking Sr. Lars Pålsson Syll Thorstein Veblen Edward Lawrence Wheelwright Erich Zimmermann Key concepts and ideas Accelerator effect Administered prices Barriers to entry Bounded rationality Conspicuous consumption Conspicuous leisure Conventional wisdom Countervailing power Effective competition Herfindahl index Hiding hand principle Hirschman cycle Instrumentalism Kuznets cycles Market concentration Market power Market structure Penalty of taking the lead Satisficing Shortage economy Structure -- conduct -- performance paradigm Technostructure Theory of two - level planning Veblen goods Veblenian dichotomy Related fields Behavioral Economics Development economics Economic sociology English historical school of economics French historical school Historical school of economics Legal realism New Institutional Economics Post-Keynesian economics GND : 4037621 - 7 Retrieved from `` https://en.wikipedia.org/w/index.php?title=Market_structure&oldid=842602242 '' Categories : Market structure Hidden categories : Wikipedia articles with GND identifiers Talk Contents About Wikipedia Alemannisch Български Čeština Deutsch Español Euskara فارسی 한국어 Bahasa Indonesia עברית Latina Nederlands 日本 語 Norsk پښتو Português Română Русский Simple English Svenska Türkçe Українська 中文 14 more Edit links This page was last edited on 23 May 2018, at 13 : 42. 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Question: economists define as a market structure with a few large firms
Answer: Oligopoly