Definition
Market power
The degree to which a firm in a market is able to control its output price.
Oligopoly
Definition
Oligopoly
A market structure dominated by a few large firms.
- Oligopolies are one of the most common market structures in real world.
- Oligopolies are market structures with characteristics such as:
- A few large firms
- Some product differentiation
- High barriers for entry and exit
- Oligopolies have high market power:
- This means that they can affect the price in the market.
- Hence, their revenue curves are not flat and change as the output changes.
Oligopolies include:
- Car markets
- Airline industry
- Telecommunications
- Tech platforms
Monopolistic Competition
- Monopolistic competition is another common market structure.
- Monopolistic markets are typically characterised by:
- Large number of small firms
- No or low barriers for entry and exit
- Some product differentiation
- Each firm is selling a product which is a close substitute of its competitors product.
- They are trying to compete in fields such as quality and quantity.
- Monopolistic competition firms have some market power:
- This means that they can influence the price in the market to a slight extent.
- Therefore, their revenue curves are not flat and change as the output changes.
Monopolistic competition firms include:
- Clothing Brands
- Cosmetics Brands
- Consumer Electronics
- cell phones, laptops, etc.
- Do not confuse Monopolistic Competition with Monopoly.
- Many students think that Monopolistic Competition is just a competitive monopoly.
- However, this is incorrect as monopolistic competition has large number of firms with product differentiation, while monopoly has a single firm with a unique product.
