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Economics ch3B: market structure - Coggle Diagram
Economics ch3B: market structure
PERFECT COMPETITION
large number of buyers and sellers
each firm is a price-taker
no BTEs
any firm can freely enter
products are homogenous
every product is a perfect substitute of each other
perfect knowledge
producers and consumers are fully aware of market conditions
demand curve
individual: perfectly price elastic, horizontal line
market demand: downward sloping
MONOPOLY
sole seller
no direct competition, price setter
high BTEs
natural
control of essential resources or access to markets
technological superiority
economies of scale
artificial
deliberately erected barriers
limit pricing
legal/statutory barriers
network effects
unique product
no competition for the product
imperfect knowledge of market
consumers and other sellers have imperfect knowledge of market conditions
demand curve
monopolist and industry DD curve is the same
relatively price inelastic, no substitutes
MONOPOLISTIC COMPETITION
large number of buyers and sellers
each firm have limited influence over market price
low BTEs
existing firms unable to stop new firms from entering, can enter easily
differentiated products
imperfect substitutes, each firm has some degree of monopoly power and is a price setter
imperfect knowledge
consumers and other firms do not have the same knowledge of the market, allows each firm to set diff prices without losing market share
demand curve
firm: has some market power, downward sloping, relatively price elastic
OLIGOPOLY
few large dominant sellers
each firm has considerable influence over market share, mutually interdependent
high BTEs
natural or manmade
homogenous or differentiated products
mergers and collusion (homogenous)
non-price competition (differentiated)
imperfect knowledge of the market
consumers and other producers have imperfect knowledge of market conditions
mutual interdependence
non collusive
price rigidity --> kinked demand curve
engage in non-price competition
engage in price competition
price wars
predatory pricing
mergers
collusive
collusion
formal collusion and cartels
group of firms cooperate evenly
tacit collusion and price leadership
other firms follow pricing behaviour of dominant firm
non-price competition
price competition