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Non-Competitive Markets

In this chapter, important topics like differences between Perfect Competition and Monopoly, Oligopoly, Monopoly etc. are mentioned.

Under competition, both the purchasers and merchants are value takers. Moreover, there exist different types of market structures, which may not fulfil the competitive nature of the market. A market is a non competitive market when the organisations acting in such a market have the ability to impact the cost, directly or indirectly. In other words, a market is not competitive when the agents that operate in it have the ability to affect the price, either directly or indirectly, which does not occur under perfect competition.

Monopoly: 

  1. It is a market structure in which there is a solitary merchant or maker of a specific item.
  2. In restraining infrastructure, no other item fills in as a substitute for this ware.
  3. To keep the monopoly in the market, adequate limitations are needed to be set up to keep some other firm from entering the market and to begin selling the ware. 
  4. For a monopolistic firm, the cost relies upon the amount of the ware sold as the firm can sell a bigger amount of the item just at a higher cost as well as the other way around.   
  5. The firm can likewise conclude the cost at which it wishes to sell its product, and hence, decides the amount to be sold.

Features of Monopoly:

  • Single seller 

There is only one seller or producer of a commodity. As a consequence, the monopoly business has complete control over the commodity’s supply. The monopolist might be a person, a company, a collection of companies, or the government itself. Because of its exclusive control over the commodity, a monopoly corporation may naturally exploit purchasers by charging nearly any price for its goods.

  • Absence of replacements for the product

The monopolist’s product has no close substitute. While certain product equivalents may be accessible, they are not near substitutes in the sense that such substitutes are not similar items.

  • Difficulty entry of a new firm

The monopolist exerts control over the market situation in such a way that it is very difficult for a new business to join the monopolistic market and compete with the monopolist by manufacturing the same product.

  • Discrimination in Pricing

Price discrimination is the practice of charging different prices to different purchasers for the same goods at the same time.

 Differences between Perfect Competition and Monopoly:  

Perfect Competition

Monopoly

Refers to a market in which a large number of firms offer a similar product.

A monopoly market is a market structure in which a single business is the only manufacturer of a product that has no close alternatives in the market.

At the equilibrium production, the price equals the marginal cost.

The price exceeds the average cost at equilibrium production.

There are no limitations or hurdles to entry for new enterprises.

It imposes stringent limits on new entrants to the market.

Prices are established by supply and demand dynamics, therefore there is no price discrimination by sellers.

Various groups of purchasers might be charged different prices by the monopolist.

Oligopoly:

  1. It is a market structure, where for a specific ware there exist a couple of vendors (multiple). 
  2. In the oligopoly market, the item sold by the organisations is homogenous. 
  3. The exceptional instance of oligopoly where there are by and large two vendors is named duopoly.
  4. In the oligopoly market, each firm is moderately enormous when contrasted with the size of the market.
  5. Each firm can influence the stockpile, supply, inventory, and subsequently impact the market cost. 
  6. Any adjustment of supply or cost by one firm can altogether affect the wide range of various firms too.
  7. In an oligopoly, firms can likewise go about as a cartel and make monopolistic conditions. Then again, they can continue to undermine every other cost to draw in more shoppers.

Features of Oligopoly:

  • Few large sellers

In an oligopoly market, the number of competitors is limited – when there are two or more, but not many sellers. What matters is that these few merchants account for the vast majority of sales in the sector. These “few” merchants intentionally control the business and compete fiercely. Each corporation is aware that it has a high degree of monopolistic power.

  • Interdependence in  Decisions Making

Interdependence basically indicates that the acts of one business influence the actions of other companies. Because the number of sellers is limited, each business must consider the potential response of its rivals while making choices. A single seller’s business choice will have a significant influence on competing enterprises’ product prices, production, and profits.

  • Obstacles to the entry of new firms

The fundamental reason for the low number of businesses is that there exist barriers that hinder firms from entering the sector. Patents, big capital, ownership over critical raw materials, and other factors restrict new enterprises from joining the sector. Only those who can overcome these obstacles are permitted to enter.

  • The role of selling cost

 Due to intense rivalry and company interdependence, numerous sales marketing strategies are  used. It is increasingly reliant on non-price competition.

Conclusion

We looked into non competitive markets and their types. We talked about monopoly and oligopoly, highlighting their features. Lastly, the most prominent market structure is monopolistic competition, which is characterised by brand names and marginally differentiated items with numerous replacements.