Four market structures - general comparison

Four market structures result from the successively declining degrees of competiton in the market for a particular commodity. The table below summarizes the main features of the four market structures. Perfect competition is obviously at one extreme (many small firms selling an identical product), while pure monopoly (a single firm) is at the other. In between are hybrid forms — called monopolistic competition (many small firms each selling products slightly different from the others') and oligopoly (a few large rival firms) —that share some of the characteristics of perfect competition and some of the characteristics of monopoly. Based on the differing outcomes of different market structures, economists consider some market structures more desirable, from the point of view of the society, than others

Perfect competition is far from the typical market form in the U.S. economy. Indeed, it is quite rare. Many farming and fishing industries approximate perfect competition, as do many financial markets (such as the New York Stock Exchange).

Pure monopoly —literally one firm—is also infrequently encountered. Most of the products you buy are no doubt supplied by oligopolies or monopolistic competitors. So, most of American industry is neither as perfectly competitive as the <pure competition> model requires, nor as monopolistic as the <pure monopoly> model requires. Most of industries lie somewhere between those two extremes.

Type of market structure	Number of sellers	Nature of the product	Barriers to entry	Where to find it
Perfect competition	Many	All firms produce identical products (wheat)	None	Some agricultural markets and parts of retailing sales
Monopolistic competition	Many	Different firms produce different products (restaurant meals)	Minor	Most of the retailing sector, textiles, restaurants
Oligopoly	Few	Firms may produce identical or differential products(toothpaste)	May be considerable	Much of the manufacturing sector, esp.autos, steel, cigarettes
Pure monopoly	One	Unique product	May be considerable	Public utilities

V. PERFECT COMPETITION

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