<3.8 MARKET STRUCTURE> 

• When we talk about MARKET STRUCTURE we are talking about the CHARACTERISTICS of a market (E.g. the market for International schools in HK) that influence its LEVEL OF COMPETITION and hence its PRICE SETTING ABILITY/MARKET POWER.

• These characteristics mainly include:-

  • • 1. Number of firms in the market (e.g., one, few, many).

      2. Market share and concentration (how dominant are the top firms?).

      3. Type of product (identical/homogeneous or differentiated).

      4. Ease of entry and exit (how easy is it for new firms to join?).

      5. Price control (how much control does a firm have over the price?).

• Explain how each of these characteristics influence the level of competition and price setting ability of firms in these markets.

• I have done the first one!

  • • • • Number of firms in the market (e.g., one, few, many).

          • • "Clearly if there are many firms in the market, competition is high and therefore a single firm can't price its good too high or it will lose all its customers to it's rivals hence it has low price setting ability"

        • Market share and concentration (how dominant are the top firms?).

          • • "....

With reference to the features listed above a competitive market is one where there are many firms that compete against each other to sell similar, good-quality products to many consumers at very similar prices, with little to no entry barriers to new firms.

Competition tends to LOWER PRICES, as firms try to attract customers.

"What would happen to your school fee if TAS shut-down?"

• Firms must maintain or IMPROVE QUALITY to stand out.

• "What would happen if TES, didn't build new facilities!"

• More firms mean MORE PRODUCT CHOICES for consumers.

• "Thankfully, if you hate me or this school you do have options!"

• Profit margins MAY BE LOWER due to the pressure to cut prices and increase quality.

• "TES can't easily raise price and must continuously maintain costly maintenance, so its profits are limited!"

• According to the definition above and with reference to the 4 impacts, do you think the bubble-tea market in Taiwan is a competitive market?

A monopoly is a market with ONLY ONE DOMINANT SELLER or producer.

1. Single dominant seller with high market power "We are your Gods!"

2. High barriers to entry for other firms "We have no rivals!"

3. Can influence price (price maker) "This is the price, take it or leave it!"

4. Often provides a unique product or service "This can't be bought elsewhere!"

• According to the definition above and with reference to the characteristics and pros and cons, can you explain why the market for diamonds /or/ sunglasses is considered a monopoly.