conomists have names for these different market structures. They are Pure Competition, Monopolistic Competition, Monopoly and Oligopoly.
Pure Competition
Pure competition is a market scenario that includes a large number of autonomous and knowledgeable buyers and sellers of an identical product. Yet none of which are capable of influencing the price. There are five major conditions, which characterize purely competitive markets.
1. There are a large number of buyers and sellers. No single buyer or seller is large enough or powerful enough to affect the price of the product.
2. Buyers and sellers deal with identical products. Therefore buyers do not prefer one seller s merchandise over another s because there is no brand names, and no need to advertise.
. Each buyer and seller acts autonomously, there must be no collusion. If such a situation occurs, sellers would compete against one another for the consumer's dollar. Buyers also compete against each other and against the seller to obtain the best price.
. The buyers and sellers are knowledgeable about the items for sale. Because all products are exactly the same, customers would have little reason to remain loyal to one seller.
. The buyers and sellers are free to get into, conduct, and get out of business; thus making it difficult for a single producer to keep the market just to itself.
Monopolistic Competition
Since we live in a society where the five elements of pure competition are not available to us, then we are clearly operating in a state other than pure competition. Instead we operate under a different model of competition known as monopolistic competition. Any time the elements of pure competition are not met the existing model is monopolistic competition.fundamental difference between a pure competitor and a monopolistic competitor is that the latter refrains from selling identical products. By employing product differentiation, the monopolistic competitor is trying to establish a comparison between its product and another competitor s product.
Oligopoly - a few large sellers dominate and have the ability to affect prices in the industry. Because of the fact that in an oligopoly there are very few firms, whenever one firm does something, the others follow suit. Since all the firms have considerable power and influence, firms tend to act together. There are times when the interdependent behaviour of the firms results in a formal agreement to set prices; this is termed «collusion». Price-fixing, a type of collusion, is the action taken by an oligopoly to charge the same or similar prices for a product. The firms must also agree to divide the market so that each is guaranteed to sell a certain amount. Yet collusion is against the law because it restrains trade. Price wars are also common in oligopolies. When one firm lowers prices, it leads to a series of price cuts by all producers that may lead to unusually low prices in the industry. Raising prices is also risky unless the firm knows that rivals will follow suit. Otherwise, the higher priced firm will lose out on sales. An example might be Coca Cola and Pepsi which dominate the soft drink market.
Pure Monopoly exists when a specific person or enterprise is the only supplier of a particular commodity. Thus, the main characteristics of monopoly include profit maximizing orientation; a monopolistic enterprise decides the price of the good or product to be sold; there are tough barriers to entry - other sellers are unable to enter the market of the monopoly. As in a monopoly there is one seller of the good which produces all the output, the whole market is being served by a single company, and for practical purposes, the company is the same as the industry. A monopolist can change the price and quality of the product. He sells more quantities charging fewer prices for the product in a very elastic market and sells less quantities charging high price in a less elastic market.
1.3 Russia s endowment
faces complex endowments that create unusual challenges for competitiveness. These challenges-some of them unique to Russia given its recent history while others which are typical for many countries at this stage of development-must be confronted head on in economic strategy. Otherwise the performance of the country will remain below its potential and the political sustainability of economic reforms will suffer.
Legacy
Russia s history as a planned economy left the country with an economic legacy...
