Market Structure

1. Introduction

It is presumed by economists that there are varied sellers and buyers in a marketplace. This results in market competition. The market structure addresses the degree and nature of competition for products and services in the market. There are varied determinants of market structure for a specific product. The determinants for market structure are the nature and amount of sellers, the nature and amount of buyers, the nature of the product, and scenarios for early exit. There exist four kinds of market structures in Australia monopoly, duopoly, oligopoly, and monopolistic competition.

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2. Market structure of Australia

Among the various market structures present in Australia the market is greatly dominated by oligopoly and monopoly market.

A monopoly is a market scenario wherein the control over the supply of a specific product that has no substitute is dominated by a single seller. The market does not have any competition thus making the seller the maker of the price. In a monopoly, there might be a single seller for a specific product which can control the supply and price but there can be multiple buyers based on the product’s nature. A monopolist sells only that product that does not have any close substitutes thereby leaving buyers with no choice but to purchase his product. In a monopolistic scenario, there are restrictions for the entry of other firms. Also, there is no competition in the market. The fundamental objective of the monopolist is the maximization of profit thus making him attempt to sell as much as he can at a suitable price.

A monopolistic competition is a kind of market structure that has the presence of a smaller number of firms that develop and sell products that are somewhat similar but are differentiated to a huge number of purchasers. In this even though there are differentiated products still the products can be considered as close substitutes. In monopolistic competition, there is freedom for entry and exit of any organization. Also in this type of market structure, it is the organization that is the price maker.

A duopoly is a market structure wherein some part of or the entire market is dominated by two organizations for any specific product or service. It can be understood as the most fundamental kind of oligopoly which is a market dominated by fewer organizations. A similar impact to monopoly can be exercised by duopoly if two organizations start to collide. This collision would hurt the consumers as they might be required to pay greater prices for the product which in a truer sense would be a highly competitive market.

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In the oligopoly market structure, the industry is made up of a small number of organizations. These few groups of organizations maintain control over the price. Similar to monopoly there are also barriers for new organizations to enter the market. The products developed by the oligopolistic organizations are almost similar so the organizations which are competing for the market share are dependent on each other as an outcome of market forces. Let us take an example suppose the economy demands only 60 products. An organization A produces 30 products and its rival organization B produces the other 30. The price of both products would be similar thus if organization A tries to bring the price of the product to enjoy a greater market share then organization B would also be required to bring down the price of the product.

The article (Gittins 2010) illustrates the political results and political campaigns to the structure of the market along with detailing the concept of duopoly and oligopoly. A simple theory of economics states that competition leads to an increase in choice. According to one of the lessons from behavioral economics illustrates that when consumers are encountered with confusing and excessive choices they do not make any decisions. It is the feeling of the majority of economists that choice in itself is a virtue and a greater number of choices is better. Competition is loved by them since their easier neo-classical model about market forecasts competition which leads to a wide range of choices. The model of simple model rests on the presumption of competition which is atomic. A wider range of small sellers that are not sufficiently big to impact the market with each required to provide consumers with what they exactly want or get thrown out of the business. In a world with a modernistic approach, there are only a few markets that work in this manner. The majority of one’s enhanced prosperity is due to the organization’s pursuit of economies of scale. This generates a tendency among the organizations to develop huge for any markets that get dominated by fewer numbers of larger organizations.

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Thus the prevalence of real-world oligopoly. Evidently, under duopoly and oligopoly a type of which is specifically common in Australia, there are only fewer numbers of sellers leading to a lesser number of choices albeit each organization is expected to offer a wide range of products.

In an oligopoly, there is competition between the organizations for market share as an increase in the share of the market is the only major way to increase revenue. Still, each organization has a bigger share of the market and each can impact the market price and thereby influence others’ fortune (Collin 1997). It can be comprehended that an oligopolistic market takes on an unknown form in the fundamental model of the market. Organizations concentrate on one another without making a move before taking into consideration what the reaction from their rivals would be.

In a duopolistic market, the two rival organizations share the market. The only fight is that of greater market share. Because of the benefits provided by oligopoly in Australia, various organizations have increased their revenue but in recent years the latest developments have been observed (Simon 2015).

Solaris Paper and the Indonesian organization Asia Pulp and Paper are preparing for the latest assault on the $1.4 billion oligopoly in the toilet paper and facial tissue market in Australia with the Emporia range which would be very costly on the shelves of Woolworths and Coles. The aim is to shake the oligopoly market.

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3. Conclusion

A great example of oligopoly is observed in the case of the toilet paper and facial tissue market in Australia as two organizations Solaris Paper and Asia Pulp and Paper are trying to gain control over the entire market with the help of Emporia.