Market Structure

Market structure refers to the different types of structure that may exist in a supply market such as monopoly, oligopoly, duopoly, imperfect competition, and oligopsony and monopsony, each of which has different implications for competitive behaviour. Monopoly occurs when there is only one supplier; however in some markets an effective monopoly exists where the market share of the largest player is above 80% or 90%. If the combined market share of the top four players is more than 80%, then this is an oligopoly and there are likely to be strong barriers that prevent competitors from entering the market. The balance of power in these markets is skewed in favour of the suppliers and competitive processes may not be effective in securing value for money. Monopolistic competition occurs when there is a competitive market with a large number of firms each having a small proportion of the market share and slightly differentiated products. The combined market share of the top four suppliers might be less than 50% in this case. Oligopsony and monopsony occur when the buyers in the market are tightly concentrated, for example suppliers of submarines would have relatively few customers. See also Market Concentration.