Before learning about market structure analysis, you should know about the market first. The market is where the sellers and buyers meet. The interaction they make, both potential and actual, will determine the good’s price or the price of goods set.
And the market structure concept is the market characteristics that influence both behavior and the results of companies working in the market. Some primary aspects determine the market structure. What are those aspects that determine the market structure?
Saudi Market Analysis to Understand the Market Structure
According to Saudi Market Analysis, several aspects that determine the market structure include the agents or buyers and sellers in the market, the relative strength of negotiation to set the prices, the agents’ concentration degree, the degree of products’ uniqueness and differentiation, and the ease of exiting entering the market.
The differences and interaction between the aspects above are allowing for some market structures to exist. Then there are some different market structures to analyze before a company can enter the new market.
Different Market Structures to Analyse
There is perfect competition in an efficient market. Goods in that market are produced by leveraging the most efficiently with factors in the most minuscule amounts.
The market is also considered an unrealistic market but still has exceptional interest because of theoretical and hypothetical reasons.
Then there is imperfect competition. This competition includes entire situations that are different from the ideal situation. The buyers and sellers can both influence the goods’ price determination. This can lead to some efficiency losses. This competition includes some different market structures.
There are five different types of market structure analysis under imperfect competition. They are a monopoly, oligopoly, monopolistic competition, monopsony, and oligopsony.
Monopoly and Oligopoly Market Structure
Monopoly market structure represents the perfect competition’s opposite. This structure market’s composition is the sole seller. The exclusive seller will have the full power needed to set the goods’ prices.
Oligopoly is a market structure where some companies offer the products provided there. But the seller’s number is not significant enough to guarantee the prices of perfect competition. This market structure usually is studied by duopolies analysis.
The analysis method can model the market more efficiently. Besides, the technique allows the main conclusions to be extrapolated to oligopoly.
Monopsony and Oligopsony Market Structure Analysis
Monopsony is similar to a monopoly market structure. But this one is where many companies are selling products with a monopsonist or one buyer only, meaning that the buyer has the full power to negotiate the price.
Oligopsony, also similar to oligopoly, is when there are many buyers and sellers. The sellers must deal with any negotiating power that is increased from only some available buyers in the market. Those buyers are called oligopsonistic.
Monopolistic Competition
This is a market structure with firms in high numbers producing similar goods but unique because of the differentiation. The differentiation allows the prices to be higher than the marginal costs. The differentiation makes every producer become a monopoly.
Understanding the market structure will help you see your company’s position in the market and find the best way to be different and win the competition.