How to determine market structure.
You can determine market structure by:
Number of firms in industry:
degree
of concentration is shown by Herfindahl – Hirschman index
By Type of good:
Goods can be:
a)homogeneous
b)diversified
c)unique
Degree of influence on price:
The more the influence on price is, the more monopolized market is.
Number of entry and exit barriers
exclusive rights
owning rare resources
copyrights
illegal methods
economies of scale
Pricing in oligopoly and monopoly.
Price in oligopoly.
Oligopoly usually bears non-price competition as price behavior is constrained with interdependence (prisoners’ dilemma).
According to prisoners’ dilemma both criminals will recognize their crime, because of high risk and absence of assurance in the actions of other criminal. Such absence of assurance is the key point why companies in oligopoly cannot have rice competition. If one company drastically increases the price it will loose all customers. There is no assurance that another company will also increase the price as it is easier for it to do nothing and wait as the customers flow from company with increased prices. The price increase should be simultaneous by both companies. This should bear a kind of price agreement between companies.Price agreement does not take place because:
Forbidden by law
No full trust
Price discrimination.(Molopoly)
Price discrimination Is the situation, when there is different price for the same good.
3 Levels of price discrimination:
1)Each unit of good is sold at maximum price
2)If volume of purchase increases, price decreases.
3)Segmentation. Market is divided into segments and each segment has own price.
Also price discrimination can be:
1)by customers( studentam proezd v obshestvennom transpote deshevle);
2)by place (odinakovye kvartiry v centre I v ainabulake imeut raznuu cenu);
3)by time (kogda-to internet vecherom byl deshevle, chem utrom).