Market Structure - mikroekonomia.net
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Market Structure - mikroekonomia.net
Instytut Ekonomii Market structures and efficiency Prof. Tomasz Bernat Microeconomics Department Institute of Economics tomasz.bernat@usz.edu.pl Instytut Ekonomii Neo-clasical economics • Basic teorem: • Competition is good solution but monopolisation is bad solution for the economy: – The perfect competition is a market structure where economics resources are allocated in optimal way – Monopoly lead to wrong resources allocation • Questions: Is it right? For whom? For what? In what conditions? Slajd nr 2 Instytut Ekonomii Market Structure • Market Structure – those characteristics of the market that significantly affect the behavior and interaction of buyers and sellers Slajd nr 3 Instytut Ekonomii Market structure – criteria of describing • • • • • Number and size of sellers and buyers Type of the product Conditions of entry and exit Undertaken form of competition Transparency of information Slajd nr 4 Instytut Ekonomii Number and size of sellers and buyers • The example: – – – – 10 companies in a single market Case 1: all companies have the same market share Case 2: the first company has 91%, all others 1% each Question: where the competition is stronger? • Kind of competition: – Quantitative competition – Qualitative competition Slajd nr 5 Instytut Ekonomii Type of the product • The kind of product’s groups – Standard – Differented Slajd nr 6 Instytut Ekonomii Undertaken form of competition • Price competition • Non-price competition Slajd nr 7 Instytut Ekonomii Conditions of entry and exit Structural barriers • High capital cost • Economies of scale • Product differentiation and brand loyalty • High switching cost • Ownership/control of key factors or outlets Strategic barriers • Limit pricing • Excess capacity • Vertical integration • Sleeping patents • Predatory pricing • Tying sales Institutional barriers • Patents • Regulations Slajd nr 8 Instytut Ekonomii Transparency of information • Full information • Non-transparent information • Problem of information asymmetry Slajd nr 9 Instytut Ekonomii Market Structures • The four market structures – perfect competition – monopoly – monopolistic competition – oligopoly Slajd nr 10 Instytut Ekonomii Slajd nr 11 Instytut Ekonomii Perfect Competition - structure • Many and small sellers, so that no one can affect the market • Homogeneous product • Free entry to and exit from the industry • Transparent and free information Slajd nr 12 Instytut Ekonomii Pure Monopoly- market structure • Only one producer in the industry • The product does not have close substitutes • Blocked entry Slajd nr 13 Instytut Ekonomii Monopolistic competition - structure • • • • Many and small sellers Differentiated product Free entry and exit Transparent and free information Slajd nr 14 Instytut Ekonomii Oligopoly – market structure • A) Tight oligopoly – a few big firms in the industry with comparable market shares B) Dominant firm oligopoly – one of the big firms in the industry is recognized as the price leader • Homogeneous / Heterogeneous oligopoly • Significant barriers to entry to and exit from the industry • Significant barriers to information Slajd nr 15 Instytut Ekonomii SCP Paradigm Basic Conditions Market Structure Conduct Performance Slajd nr 16 Instytut Ekonomii BASIC CONDITIONS • • • • • • SUPPLY raw material technology product durability value/weight business attitudes unionization • • • • • • DEMAND price elasticity rate of growth substitutes marketing type purchase method cyclical and seasonal character Slajd nr 17 Instytut Ekonomii Market structure Slajd nr 18 Instytut Ekonomii Market Conduct • Market Conduct – a firm’s policies toward its market and toward the moves made by its rivals in that market Slajd nr 19 Instytut Ekonomii CONDUCT • • • • • pricing behavior product strategy research and innovation advertising legal tactics Slajd nr 20 Instytut Ekonomii Market Performance • Market Performance – how well does an industry do what society might reasonably expect it to do Slajd nr 21 Instytut Ekonomii PERFORMANCE • • • • • • profitability allocative efficiency static production efficiency dynamic efficiency - progress full employment equity Slajd nr 22 Instytut Ekonomii Perfect Competition - Performance • • • • • • P = MR MC = MR P = MC P = AC AC = MC AC minimum Slajd nr 23 Instytut Ekonomii Perfect Competition - Performance Static Efficiency • Efficiency in allocation • Efficiency in motivation • Efficiency in distribution MC = P AC = MC AC = P The Perfect Competition achieves static efficiency Dynamic Efficiency There is NO potential and motivation for innovations and technological progress The Perfect Competition does not achieve dynamic efficiency Slajd nr 24 Instytut Ekonomii Pure Monopoly - performance Static efficiency • • Efficiency in allocation Efficiency in motivation MC < P excess capacity • Efficiency in distribution AC < P The pure monopoly does not achieve static efficiency Dynamic efficiency There is a potential and motivation for innovations and technological progress The pure monopoly is motivated to achieve dynamic efficiency at the presence of potential competition Slajd nr 25 Instytut Ekonomii The most innovative companies in the World 2015 The Forbes ranking Questions: are the companies SME or big? What marekt structure they represent? Slajd nr 26 Instytut Ekonomii No 1 Tesla Motors Slajd nr 27 Instytut Ekonomii No 2 Slajd nr 28 Instytut Ekonomii No 3 Alexion Pharmaceuticals Slajd nr 29 Instytut Ekonomii No 4 Regeneron Pharmaceuticals Slajd nr 30 Instytut Ekonomii No 5 ARM Holding Slajd nr 31 Instytut Ekonomii No 6 Unilever Indonesia Slajd nr 32 Instytut Ekonomii No 7 Slajd nr 33 Instytut Ekonomii No 8 Slajd nr 34 Instytut Ekonomii No 9 Under Armour Slajd nr 35 Instytut Ekonomii No 10 Biomarin Pharmaceutical Slajd nr 36 Instytut Ekonomii Summary of 10 the most innovative Slajd nr 37 Instytut Ekonomii Competition vs monopolisation • Questions: – – – – Is it right? For whom? For what? In what conditions? Slajd nr 38
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Prof. Tomasz Bernat Microeconomics Department Institut of Economics kontak@tomaszbernat.pl
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